We have noticed that the First-Tier Tax Tribunal has been become much more tolerant with traders in Missing Trader Intra Community (“MTIC”) appeals.
An MTIC case arises where a company has been informed by HMRC of tax losses in their supply chains and then later receive large assessments because HMRC allege that the trader either knew, or should have known, of the connection to fraud.
HMRC has the power to deny the input tax (VAT on purchase invoices) on all transactions connected to fraud, if they believe that persons controlling the company knew or should have known of that connection.
HMRC too often rely simply on previous warnings or poor due diligence to support their case, but Tribunals are rejecting more and more assessments because the awareness of a risk, no matter how high, is insufficient. The Court of Appeal in Mobilx reached that finding in 2009, but only now are we seeing more traders succeeding on appeal. That Mobile Judgement is at: