Harry Construction Limited v The Commissioners for HMRC
Decision date: 30 June 2025
Neutral citation: [2025] UKFTT 799 (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
Harry Construction Limited appealed HMRC decisions denying two input tax claims: £705,741 as purchases connected with fraudulent VAT losses and £222,246 for lack of valid VAT invoices from UP. The First-tier Tribunal found the suppliers in the relevant chains were fraudulent and occasioned VAT losses, that HCL knew or should have known its purchases were connected to that fraud, and that UP’s invoices failed regulation 14’s description requirement; both appeals were dismissed.
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: medium
The tribunal held that a trader can lose the right to deduct input tax where, on objective factors and cumulative circumstantial evidence, it knew or should have known that its purchases were connected with fraudulent VAT losses; a failure to conduct reasonable, ongoing due diligence (including heed to HMRC veto/due‑diligence letters and industry indicators) can satisfy the "should have known" standard. The tribunal also treated regulation 14 as requiring an invoice description sufficient for an independent observer to identify and quantify the supplied services, so vague entries (e.g. "Valuation Total") may be insufficient.
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 observed (non‑bindingly) that HMRC’s provision of veto/due‑diligence letters and guidance is a relevant factor in assessing what a taxpayer should have known, that CIS gross payment status or similar commercial assurances do not relieve a trader of the need for physical/ongoing due diligence, and that tribunals should assess circumstantial indicators cumulatively rather than in isolation.