G Comms Ltd v Commissioners for Her Majesty's Revenue and Customs
Decision date: 24 November 2010
Neutral citation: [2010] UKFTT 605 (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
G Comms claimed c.£2.29m input VAT on 18 export transactions for 04/06; HMRC refused repayment, tracing each chain to defaulting fraudulent traders and bank evidence showing circular same‑day payment flows. The tribunal found the 18 Deals formed part of an orchestrated VAT fraud, that G Comms' due diligence was superficial and often merely complied with Notice 726, and that a reasonably competent person in G Comms' position ought to have known of the connection to fraud. The appeal was dismissed and repayment refused.
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 a supply is connected to VAT fraud and the recipient knew or ought to have known of that connection, input VAT credit is not available. "All reasonable and proportionate precautions" may require enquiries beyond mechanical compliance with documentary checklists (such as Notice 726) when circumstances—including unusually rapid turnover, trading patterns, market anomalies, or other red flags—would give rise to suspicion.
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 criticised mechanical reliance on Notice 726 checks and suggested that a reasonable trader facing MTIC/vulnerable markets should apply commercial scepticism: compare trading volumes to market data, pursue extra enquiries (eg tracing chains, querying funders and freight forwarders), and not limit inspections to minimal sampling where red flags exist.