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Mobile phone trader wins VAT appeal

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28th May 2013
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Mobile phone trader CCA Distribution Limited has been thrown a lifeline after winning a legal appeal against HMRC’s decision to withhold VAT re-payments worth about £10m. The victory for the business, which is in administration, is likely to encourage other traders who have similar tribunal appeals against HMRC.

HMRC claimed that the Stockport-based business knew that it was part of a “contra trading” fraud relating to handsets traded in the UK and Europe between April and June 2006.

Contra trading fraud is a variation of “missing trader” fraud, in which people try to evade VAT by participating in two separate types of transaction during the same VAT period. One of the transaction chains is legitimate, the other isn’t. The output tax from one chain is designed to off-set the input tax incurred on the other chain. 

VAT fraud is estimated to cost the UK £3.3bn a year.

In 2007, HMRC denied CCA the right to deduct tax of £6.3m for transactions during April and May and a further £3.5m for deals made in June. HMRC said that CCA knew or should have known that the transactions were fraudulent.

But in a ruling published in April in the case of CCA Distribution Limited v HMRC [2013] UKFTT 253 (TC) Judge Malachy Cornwell-Kelly of the first-tier tax tribunal, concluded there was no evidence to suggest Ashley Trees, the "guiding mind" behind CCA, knew he was party to the fraud.

Martin O’Neill, customs investigation and litigation partner at Smith & Williamson, who represented Trees, said that CCA was forced into administration after HMRC refused to let the business deduct £10m worth of tax. “Not many businesses could survive that,” he told AccountingWEB.

The legal battle may not be over yet, though, as HMRC can appeal the tribunal’s decision.

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By
29th May 2013 16:31

Tied decisions and the casting vote of the Chairman

One all and all that !

Skim readers of this decision might be confused that the head note indicates the appeal is allowed and the last paragraph records that the appeal is dismissed. This is explained by the unusual situation of there being a difference between the Chairman's view and the member's view. This means, to begin with, a 1 1 decision, but In this situation the Chairman then has a casting vote.

The Chairman's part of the decision ends at paragraph  411 and it is followed by a statement of dissent which ends with the  words mentioned above hence the apparent, but not real contradiction.

Perhaps the moral of the story is the importance of having an odd number for a Tribunal. .

John Flood

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By Malcolm McFarlin
03rd Jun 2013 12:51

HMRC to appeal

On the basis of 'tied decision' it seems an absolute certainty that HMRC will appeal the decision to the Upper Tax Tribunal. The battle may be won but not the war.

Malcolm McFarlin

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