Procomm Consultancy Ltd v Commissioners for Her Majesty's Revenue and Customs
Decision date: 10 November 2010
Neutral citation: [2010] UKFTT 561 (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
Procomm appealed HMRC’s refusals to allow input VAT on 18 high‑value mobile‑phone transactions in March and May 2006; the tribunal found each chain was connected to MTIC fraud (a point conceded at hearing) and examined whether Procomm knew or ought to have known of that connection. Considering the objective features of the transactions and the totality of surrounding circumstances (including Procomm’s management, finance, timing of checks, and documentary deficiencies), the tribunal concluded Procomm did know, and alternatively ought to have known, that the dealings were connected with fraud. The appeal was dismissed and HMRC’s denial of the input tax claims was upheld.
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 factors and the totality of surrounding circumstances indicate that supply chains were contrived and connected to MTIC fraud, a taxable person may be deprived of the right to deduct input VAT if it knew, or ought to have known, of that connection; HMRC bears the burden, on the balance of probabilities, to prove both the connection to fraud and the taxpayer’s knowledge or means of knowledge.
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 decision observes that a trader’s credibility, the way its finances are managed (including reliance on short‑term high‑interest loans), the timing and quality of due diligence documentation, late submission of returns, and the ineffective or untimely use of routine industry checks (e.g. Redhill/Europa) are relevant contextual factors when assessing knowledge of connection to fraud.