Should have known

The taxpayer company collected unwanted mobile phones which were sold on to India Africa and South East Asia. The business also bought handsets from mobile phone retailers.

HMRC investigated the taxpayer’s VAT repayment claims in March 2004. The department was satisfied the firm had nothing to do with missing trader intra community (MTIC) fraud but the tax authority discussed the nature of the offence with the taxpayer.

The company subsequently started dealing with M a director of a company connected to MTIC fraud. HMRC refused to repay input tax to the taxpayer in regard to the transactions with M.

The taxpayer appealed. The First-tier Tribunal found fraud had been committed by M against the taxpayer and M’s knowledge of the offence should not have been attributed to the taxpayer.

While in principle knowledge should be attributed to the taxpayer the exception in re...