M B C Trading Ltd Kingston Components Ltd v Commissioners for Her Majesty's Revenue and Customs
Decision date: 17 December 2009
Neutral citation: [2009] UKFTT 372 (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 refusals by HMRC to repay input VAT to M B C Trading Ltd and Kingston Components Ltd on the basis that their transactions were connected to MTIC/carousel fraud and that they knew or ought to have known of that connection. The First-tier Tribunal found cogent evidence (including FCIB banking records showing circularity of funds and matching invoices) that the transactions were part of a fraudulent carousel and that both appellants knew of the fraud. The tribunal dismissed the appeals and ordered the appellants to pay HMRC’s costs.
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 cogent evidence shows that transactions form part of an MTIC carousel and the circularity of funds corresponds to the invoiced transactions, a tribunal may infer that those transactions were connected with fraudulent evasion of VAT. Knowledge of that connection may be assessed by reference to objective factors and the totality of a trader’s dealings and contextual similar‑fact evidence rather than by isolating single transactions.
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 that circularity of funds need not be accompanied by a mathematically exact linkage to specific goods to be probative of fraud, provided there is a demonstrable connection between the funds and the invoices. Recurrent identical mark‑ups, uniform profit distribution and a lack of commercial rationale across chains were noted as indicia supportive of an inference of a contrived fraud.