Konstruct Recruitment Limited & Anor v The Commissioners for HMRC
Decision date: 1 September 2023
Neutral citation: [2023] UKFTT 745 (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
Konstruct Recruitment Ltd claimed input VAT on labour supplied via a chain later found to involve fraudulent VAT losses; HMRC denied recovery of about £264k, imposed a 30% s69 penalty on the company and issued a s69D personal liability notice (PLN) to the director RS. The Tribunal accepted HMRC’s tracing and that the transactions formed part of an overall fraud, found RS an unconvincing witness, and concluded that Konstruct (through RS) should have known the purchases were connected to VAT fraud. The appeals against denial of input tax, the s69 penalty and the PLN 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 applied a fact‑specific test of whether the taxpayer "should have known" that transactions were connected to VAT fraud and held that repeated, specific warnings from HMRC about supplier tax losses combined with reliance on minimal, supplier‑provided documentary checks and sparse records can support a finding that the trader ought to have known of the fraud; the overall pattern and circumstances, not any single factor, determine culpability.
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 judgment suggests (but does not establish as binding principle) that basic checks supplied by counterparties (e.g. VRN/CIS confirmations) may be insufficient once a trader has been alerted to supply‑chain risk, and that commonplace industry practices such as informal negotiations or absence of formal contracts do not automatically excuse a failure to conduct meaningful independent checks.