A taxpayer and his company were part of a Missing Intra-Community Trader (MICT) fraud and knowingly claimed more than £6m from HMRC fraudulently.  MICT fraud is where a trader, owing large amounts of output tax to HMRC or other European tax authorities disappears but HMRC is still liable to pay the input tax credit to the trader that purchased items from the trader that disappeared.  HMRC levied a fine of more than £3m on the director of the company involved, who was part of the fraudulent scheme.  The director appealed this penalty.

The taxpayer held that the penalty, that is considered criminal under EU and European Human Rights law, was not compliant with those laws.  The lower tribunals had held that the penalty wasn’t in contravention with those laws and the Court of Appeal (CoA) has agreed.

The taxpayer held that the relevant legislation in the VAT act, now repealed, couldn’t be interpreted by reference to EU case law alone.  The CoA disagreed finding that judgements of the EU court are binding on UK courts.  Where they change the interpretation of the meaning of EU or European Human Rights law then these changes have to be considered in UK courts but that doesn’t mean that penalties, where fairly charged are incompatible with EU or European Human Rights law.  The CoA dismissed the appeal.

The decision can be found at: Butt v Revenue And Customs – Find case law (nationalarchives.gov.uk)

Please do contact us if you have received any penalty from HMRC.  We can help negotiate matters and provide relevant advice.