Cheema Construction Services Ltd & Anor v The Commissioners for HMRC
Decision date: 28 January 2025
Neutral citation: [2025] UKFTT 92 (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
This appeal concerned HMRC's denial of CCSL's input VAT (periods 01/20–07/21) and related penalties on the basis that purchases from Woodside were connected with VAT fraud by identified "Fraudulent Defaulters" and that CCSL (and Mr Cheema) knew or should have known. The Tribunal found HMRC had not proved, on the balance of probabilities, that the transactions were connected to the frauds and therefore allowed the appeal and set aside the assessed penalties. The Tribunal also concluded that, even if connection had been established, HMRC had not proved knowledge or constructive knowledge.
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
The Tribunal applied the Kittel framework and held that HMRC must prove each element (VAT loss, fraud, a connection between the taxpayer's transactions and that fraud, and the taxpayer's knowledge or constructive knowledge) on the balance of probabilities before denying input tax. Generic or historic industry warnings, letters or visits and advisory due‑diligence guidance, taken alone, do not establish the required specific connection or knowledge; the sufficiency of checks is fact‑specific.
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 (obiter) that certain indicators relied on by HMRC — such as pre‑payment of invoices to a major supplier, premises visits in the labour‑supply/construction context, and typographical or informational defects on invoices — are not necessarily indicative of VAT fraud without additional supporting evidence.