W. Reilly Limited v The Commissioners for HMRC
Decision date: 28 April 2026
Neutral citation: [2026] UKFTT 641 (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
W. Reilly Ltd appealed HMRC’s denial of VAT input tax (about £274k) and a related penalty arising from supplies from Simplify and SMP. Central issues were whether HMRC’s assessments were within the one‑year time limit in s 73(6)(b) VATA and whether the appellant “knew or should have known” the supplies were connected with VAT fraud (Kittel). The tribunal found HMRC had not shown the appellant should have known of supplier fraud and allowed the appeals, restoring the input tax and dismissing the penalty.
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 treated the one‑year rule in s 73(6)(b) as running from the date on which evidence of sufficient weight, in the assessing officer’s view, came to HMRC’s knowledge, with transaction‑specific documentary evidence of the purchaser’s due diligence being material to that inquiry. On the Kittel “should have known” limb, the tribunal applied a high objective threshold: ordinary sector risk or general warnings do not suffice—there must be circumstances making connection with fraudulent evasion the only reasonable explanation.
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 that HMRC’s generic tax‑loss/sector guidance and educational letters may put taxpayers on notice of sector risk but do not automatically satisfy the Kittel test absent specific indicia tied to the transactions. It also noted that HMRC’s access to internal investigative systems can reveal matters not objectively visible to downstream purchasers, limiting what can fairly be expected of those purchasers.