HMRC have won their case, again, against a trader that was denied a deduction for input VAT. The trader, Aria Technology Limited, ran a retail and wholesale trade in computer components and peripherals. HMRC denied a claim for input tax of around £750k. HMRC held that the trader knew or should have known that the transactions involved were connected to fraudulent transactions and the varying lower tribunals agreed with HMRC’s assessment that the trader knew or should have known and that HMRC were right to deny the deduction.
The connected fraudulent transactions were ones similar to the ‘missing intra-community trader’ fraud where one trader disappears owing a large sum to an EU VAT authority while the other traders in the chain receive credit for input tax paid but this tax is never passed on to the relevant EU VAT authority.
The appeal to the Court of Appeal (CoA) concerned the correctness of correspondence that HMRC sent to the trader. The letters were not titled ‘Notice of Assessment’ but plainly said that the trader would not receive credit for the deductions denied because in HMRC’s opinion the trader knew or should have known that they were connected to fraudulent activity. The letters then went on to ask for payment of outstanding VAT but at no point did the letters state they were assessments.
The CoA has held that the letters are assessments to VAT despite this statement not appearing on the face of the letter. The letters contained all material information necessary for the trader to understand that they are now required to pay a substantial sum to HMRC and the particular reason why along with reference to the trader’s statutory recourse.
The decision can be found at: Aria Technology Ltd v Revenue And Customs – Find case law (nationalarchives.gov.uk)
This case highlights a couple of points, the hard work HMRC have put in to combatting missing intra-community trader fraud and that all correspondence from HMRC should be treated with respect. Please contact if you have any questions regarding correspondence from HMRC.
