YBA Limited v The Commissioners for HMRC
Decision date: 12 September 2024
Neutral citation: [2024] UKFTT 827 (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
YBA Ltd, a car broker, appealed HMRC’s 2020 decision to deregister it for VAT and several VAT assessments alleging involvement in MTIC fraud. The Tribunal found YBA did not have actual knowledge of fraud but, on the totality of the circumstances and inadequate/ incoherent due diligence, should have known that many of its 2019 transactions were connected to fraud, dismissed the deregistration appeal and upheld most Kittel/Mecsek assessments while disallowing input tax or zero-rating only for specified transactions; a small number of transactions were found not proved connected with fraud and were removed from the assessments.
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
Where the only reasonable explanation for a trader’s pattern and circumstances of dealing is that transactions are connected to VAT fraud, the trader may be treated as having known such connection even absent actual knowledge; tribunals must assess the totality of transactions and surrounding circumstances and may infer that a trader “should have known” where due diligence is inadequate or incoherent. HMRC bears the burden to prove loss and the connection of specific transactions, while a trader bears the burden as to evidence of dispatch in general assessments alleging outward transport.
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 indicated—by way of guidance rather than binding ratio—that routine practical checks (company and VAT-status searches, trading history, director/address links, internet enquiries) are the sorts of enquiries that would be expected and that HMRC’s subsequent investigatory knowledge or guidance does not cure what a trader ought to have known at the time of dealing.