Deandrake Limited v Commissioners for Her Majesty's Revenue and Customs
Decision date: 14 April 2011
Neutral citation: [2011] UKFTT 250 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
Deandrake Ltd claimed £181,125.88 input VAT on four mobile‑phone transactions; HMRC refused repayment on the basis the transactions were connected to a VAT loss involving a defaulting trader. The Tribunal found the transactions were so connected and, although the company did not actually know the only reasonable explanation was fraud, it ought to have known and so was not entitled to the input tax. The appeal was dismissed and the input tax claim denied.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
Where objective circumstances surrounding transactions make the only reasonable explanation connection to VAT fraud, a trader "ought to have known" and loses the right to deduct input VAT; and the knowledge of a senior agent authorised to negotiate and conclude transactions can be attributed to the principal unless there is clear evidence the agent's wrongdoing was intended to harm the principal (limiting the Hampshire Land exception).
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal noted that features such as identical mark‑ups, rapid same‑day back‑to‑back chains, use of obscure banks, convergence of chains and similar patterns are strong objective indicators of contrivance and may support a finding that a trader ought to have known of fraud; it also observed that HMRC's post‑event investigations can reveal matters a trader did not know at the time but that prior warnings and surrounding circumstances may show the trader had means to know.