Weekly VAT News

Sintra Global Inc: Penalties for inward diversion fraud  – UT

In October 2022, Sintra Global Inc (Global) and Mr Parul Malde were successful in an appeal to the First-tier Tribunal against HMRC decisions and assessments relating to the non-payment of VAT and excise duties and related penalties, which HMRC considered to arise from the fraudulent diversion of alcohol into the UK (inward diversion fraud) and its subsequent sale in the UK by Global and Sintra SA (SA). It was HMRC’s case that Global and SA were at all material times controlled by Mr Malde. The Upper Tribunal has delivered its decision in HMRC’s appeal against the FTT decision. The UT concurred with the FTT’s finding that the burden of proof fell on HMRC with respect to the imposition of penalties. The UT also refused to overturn the FTT’s finding that Global did not supply the alcohol; the UT could not say, as argued by HMRC, that the FTT’s conclusion was one that no reasonable tribunal could have reached. Although the UT considered that the FTT erred in law in terms of the order in which it considered the issues raised in the appeal, the UT found that this error was not material to the FTT’s decision. The UT identified further errors of law in the FTT decision regarding the imposition of a director’s liability notice (DLN) which were material. Accordingly, the UT set aside the FTT decision insofar as it related to this issue. Whilst the UT upheld the FTT decision on a number of grounds of appeal, it remitted the issues regarding the validity and quantum of the assessment of the DLN to the FTT. (Contact: Rob Holland)

Failure to prevent fraud offence – guidance published

On 6 November 2024, the government published guidance on the new offence of failure to prevent fraud. The offence was introduced under the Economic Crime and Corporate Transparency Act 2023, and will come into effect on 1 September 2025. The offence is intended to “hold [large] organisations to account for fraud committed by their employees, agents, subsidiaries or other ‘associated persons’ who provide services for or on behalf of the organisation, where the fraud was committed with the intention of benefiting the organisation or their clients”. It is a defence that an organisation has reasonable procedures in place to prevent fraud, or that it was not reasonable in the circumstances for the organisation to have prevention procedures in place. One of the offences included in scope is ‘cheating the public revenue’ (which is a common law tax evasion offence), which also has some cross-over with the existing the corporate criminal offence (CCO) of failure to prevent the criminal facilitation of tax evasion. The guidance states that procedures organisations have in place for CCO may be insufficient to qualify as reasonable procedures for the offence of failure to prevent fraud, as the latter has a wider scope. Organisations will therefore need to review their procedures and put in place reasonable preventative measures. (Contact: Adam Routledge)

Finance Bill published

The Finance Bill 2024-25 was published on 7 November 2024, together with its Explanatory Notes. The Bill’s dedicated pages on Parliament’s website are here. Indirect tax measures included in the bill include the removal of VAT exemption for private school fees, rates for duties and levies, and clauses preparing for the introduction of vaping products duty and the carbon border adjustment mechanism. (Contact: Andrew Clarke)

This week’s CJEU VAT calendar

On 14 November, the CJEU will deliver its judgment in SEM Remont on input tax recovery in the absence of a valid VAT invoice.