MTIC Appeals – A Round-Up
In what has been a generally quiet period in the world of civil VAT litigation, the approach to Christmas brings with it the expected conclusion of the re-hearing of the Olympia Technology appeal before the VAT Tribunal, in which Vantis, a leading UK accounting, tax and business recovery and advisory firm, is instructed. There is no doubt that the result will have significant implications for other companies who are contesting decisions to deny VAT repayment claims, and we will, of course, provide a full update as soon as we receive the Decision.
Elsewhere, the Court of Appeal will shortly deal with three cases whose names are familiar to many – namely: Blue Sphere Global, Mobilx and Calltel. It was originally thought that the three cases would be heard separately, with Blue Sphere Global taking the lead, but we now understand that HM Revenue & Customs (HMRC) has successfully argued that all three cases should be heard simultaneously. This will inevitably delay matters, and may have an effect upon the way in which the cases are argued and presented. Whether the eventual outcome will be affected is, of course, impossible to predict, but in effect the Court will be considering two cases which HMRC has already won (Mobilx and Calltel), in conjunction with one in which the Chancellor of the High Court found against HMRC (Blue Sphere Global).
Meanwhile, many companies are still labouring under the weight of HMRC’s extended verification policy, over three years since the transactions took place, and it seems some companies have elected not to pursue the Commissioners for a decision in respect of their outstanding VAT repayment claims. We take the view that this approach is likely to result in a substantial reduction in the chances of success when the case is eventually put before the VAT Tribunals.
HMRC now seems to be serving as a matter of course new evidence obtained from the FCIB servers, and in some cases documentation obtained as part of wider criminal investigations into supply chains suggestive of an orchestrated series of frauds in operation within the grey market. Whilst much of this material may be of questionable relevance or probative value to a company’s appeal, its function is to dilute the overall credibility of the Appellant’s case.
Naturally, the introduction of this additional material inevitably leads to delays in the progress of the appeal and, as many current Appellants will confirm, even once a case is firmly within the appeal process and before the Tribunal, HMRC will use any means at its disposal to delay cases which it perceives may cause them evidential difficulties. These tactics have the added benefit of allowing HMRC more time to gather and present additional evidence, as well as plug any gaps in its existing documentary evidence. It is now also by no means unusual for a case to bear little or no resemblance to the content of the original decision letter or Statement of Case.
More than ever, the success of a case will rely upon its preparation and the perception of its witnesses. If the credibility of the Appellant is viewed as lacking in any respect, then an entire case may very well be lost. Equally, due diligence procedures will be subject to the most intense scrutiny possible, as will be the knowledge and credibility of an Appellant’s directors or senior company personnel. HMRC’s pleaded cases are becoming ever more complex, with allegations of conspiracy and increasingly convoluted fraudulent transaction chains being advanced. It is, therefore, imperative that the Appellant’s responses and presentation are robust and thoroughly prepared.
With every case lost in the Tribunals, HMRC’s confidence and standing increases. The more a Tribunal Judge sees Appellants whose due diligence is sloppy or incomplete, or whose witnesses are unable to withstand the rigorous cross-examination techniques employed by HMRC’s Counsel, the more he or she will be inclined to adopt HMRC’s stance and dismiss the appeal. Every time HMRC gains a victory as a result of an Appellant’s lack of credibility, the mountain becomes that much harder to climb for the next Appellant in line. Full and detailed preparation of an Appellant’s case is therefore vital in the current climate.
And for any companies still awaiting decisions, our advice is straightforward. You need to take the battle to HMRC. You have nothing to gain by playing a waiting game, but, potentially, there is everything to lose.
For further information please contact the Customs Investigations & Litigation Team at Vantis – Don Mavin 020 7549 8059.
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