Summary
This case concerned so-called ‘"supply chain fraud’". It was HMRC's view that the appellant, which traded in batteries and scrap, knew or should have known that its purchases from nine suppliers in four VAT periods were connected with the fraudulent evasion of VAT. They therefore denied the company the benefit of its input tax credit for those purchases and assessed the company to VAT accordingly. They also issued the company with corresponding penalties which were imposed on the two Directors at 50% each.
Background
HMRC argued the principle inâ¯Kittel that a trader who wishes to recover its input tax must deploy means of knowledge. This meant asking awkward questions of suppliers, which might drive defaulters away or put the trader on notice that something was wrong and thus cease trading with the
