VAT Umbrella Appeals Decision

16 April 2024
Author: JHA

VAT Umbrella Appeals Decision

On 27 March 2024, the Tax Tribunal released its Decision in the VAT Umbrella Appeals.

Subject to onward appeals to the Upper Tribunal, the practical consequence of the Decision is that the Lead Appellants (i) should not have had had their VAT registrations cancelled (ii) and should have their VAT registrations reinstated from the date of de-registration (iii) and were not entitled to use the FRS and EA.  The Tribunal has not yet made directions in respect of the effect of the Decision on the Related Cases (which were stayed pending the Decision in the Lead Appeals).

The Tribunal decided the Lead Appeals in the following way:

  1. It allowed the Appeal against VAT de-registration.
  2. It dismissed the Appeal against cancellation of authorisation for participation in the VAT Flat Rate Scheme (“FRS”).
  3. It dismissed the Appeal against the Employment Allowance (“EA”) decision.

In summary, the Tribunal found:

  1. That “there were objective grounds for concluding that the VAT numbers of the Lead Appellants were used for fraudulent purposes” [347], despite there being “no specific allegations particularised in the SOC that any individual or corporate entity is dishonest or has knowingly committed fraudulent acts” and “that neither the words “dishonest” nor “dishonestly” appears anywhere in the SOC” [331 and 332].
  2. That HMRC’s argument on Ablessio could not succeed “in the absence of any knowledge by the directors of the Lead Appellants that they were facilitating (enabling) the fraud of another” [353], it having not been “pleaded or put [by HMRC] to the directors of the Lead Appellants” and that the Lead Appellants “were all helpful witnesses who gave credible accounts of their roles and involvement with their respective companies” [27].
  3. That HMRC’s decision to cancel FRS authorisation in respect of the Lead Appellants was reasonable “for protection of the Revenue” [358], despite HMRC having not contacted any of the Mini Umbrella Companies before de-registering them [359] and the model having been the subject of professional advice [359].
  4. That the Lead Appellants were not entitled to qualify for EA [363].

A link to the Decision can be found here.

The Lead Appellants intend to appeal the Decision.

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