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Ineffective due diligence

04 September 2012
Issue: 4369 / Categories: Tax cases , VAT
POWA (Jersey) Ltd v CRC, Upper Tribunal (Tax and Chancery Chamber)

The taxpayer company which dealt in computer chips was registered for VAT. It claimed a repayment of input tax which HMRC refused saying the firm’s transactions had been part of a process of missing trader intra-community fraud (also known as carousel fraud).

The First-tier Tribunal found that the due diligence undertaken by the taxpayer regarding the deals had been limited. The directors had known or had the means of knowing that the transactions were connected with the fraudulent evasion of VAT.

The Revenue was correct to refuse the repayment claim. The taxpayer appealed to the Upper Tribunal.

The taxpayer claimed that even if it should have known there was fraud in a transaction higher up in the chain it was not a reason for denying a repayment claim of input tax because the company was not sufficiently involved in the fraud.


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