In the case of Butt v HMRC [2026] UKFTT 623 (TC), the FTT has dismissed Mr Butt’s appeal against a directors’s liability to pay a company penalty arising from the denial of input VAT under the Kittel principle (where the company, Quantum London Limited (“Quantum”), knew or should have known that the transactions it had entered into were connected to the fraudulent evasion of VAT).
VALUE ADDED TAX – denial of input tax – missing trader intra community fraud (MTIC) – Kittel – trading in soft drinks – officer’s liability to pay company penalty – section 69C and section 69D of the VAT Act 1994 – knowledge or means of knowledge of connection to fraudulent evasion of VAT – appeal dismissed
The FTT found that a number of companies were fraudulent defaulters in the transaction chains involving Quantum. In respect of Mr Butt (who had previously acted as director for other companies and been disqualified as a director of Trade Lynx (London) Ltd (“Trade Lynx”) for causing or allowing Trade Lynx to participate in transactions relating to fraudulent evasion of VAT which he either knew or should have known about), the FTT judged that:
“We find that Mr Butt had “blind-eye” knowledge that the transactions under appeal were connected with the fraudulent evasion of VAT. We have reached this finding on the basis of the cumulative circumstances surrounding Quantum’s transactions, what Mr Butt (as director) did or omitted to do, what he could have done, together with the history of HMRC’s high level of involvement with Mr Butt and Quantum, and before then, with Trade Lynx, since 2012.”
The FTT produced an extensive list of factors pointing to blind-eye knowledge, including the extensive history of education provided to Mr Butt by HMRC over a number of years alerting him to the risks of MTIC fraud, but Mr Butt had failed to implement adequate due diligence and had ignored obvious red flags. There was also a lack of expected paperwork. Mr Butt’s past history with Trade Lynx also counted against him.
The FTT also noted that:
“Even if we are incorrect in our findings that Mr Butt had blind-eye knowledge, the various factors that we have discussed clearly demonstrate that Mr Butt had the means of knowledge to alert him to the connection of these transactions to VAT fraud, and he would have been aware that there was no other reasonable explanation for the transactions. We therefore find, as an alternative, that Mr Butt should have been aware of the connection of these transactions to the fraudulent evasion of VAT.”
The FTT also concluded that:
“We have considered the calculations set out in Officer Mankad’s evidence as to the penalties payable. We reject Mr Butt’s submissions that those calculations are incorrect. His arguments as to non-discrimination and HMRC “profiting over and above the loss” in the event that action is taken against Quantum’s suppliers or its customers are not sustainable.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/623
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