The First-tier Tribunal has rejected the appeal in Hillhead Ltd and Anor v HMRC [2023] UKFTT 00215 (TC). The appellant companies Hillhead Ltd (Hillhead) and Hillhead Plant (Plant), which both had John Doyle as the same sole shareholder and director, had appealed assessments denying input VAT deductions on the grounds that the input tax was incurred in connection with the fraudulent evasion of VAT, and that the appellant either knew or should have known this.
The earlier Kittel judgment had established that “a taxable person who knew or should have known that, by his purchase, he was taking part in a transaction connected with fraudulent evasion of VAT must, for the purposes of the Sixth Directive, be regarded as a participant in that fraud, irrespective of whether or not he profited by the resale of the goods”.
The tribunal concluded that there had been a loss of VAT to HMRC and “In our judgment, other than fraud, there is no explanation or reason for such actions by these companies or their failure to make VAT returns or account for VAT on the supplies to Hillhead and/or Plant”. The VAT subject to the appeal was connected to that fraudulent VAT loss and “we not only consider that Mr Doyle, and therefore Hillhead and Plant, should have known the transactions were connected to fraud but that it is more likely than not that he actually knew of that connection.”
The tribunal noted:
“There was no specific factor or “smoking gun” piece of evidence that led us to our conclusion. Rather, it was the overall circumstances surrounding the deals entered into by Hillhead and Plant and their ability to engage in transactions which were not only inconsistent with Mr Doyle’s background and experience in the construction industry … but also contrary to the declared intended trade of the companies (to undertake construction projects in the case of Hillhead … and to supply plant for hire to the construction industry and machinery in the case of Plant … ). … The transactions which were undertaken by the companies also, in our judgment, bear features that we consider would concern a legitimate and reasonable businessman or trader but did not appear to have that effect on Mr Doyle.”
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08741.html
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