Eurolaser IT Limited v The Commissioners for HMRC

Facts

The appellant, Eurolaser IT Limited, is a trader in information technology products. HMRC denied it entitlement to deduct input tax of £1,628,525.16 and denied zero-rating in respect of intra-Community supplies of £503,409.29 arising from transactions in VAT periods 02/18 to 04/18 and 09/18 to 12/18, and imposed penalties totalling £312,406.16. The assessments were raised under section 73 of the Value Added Tax Act 1994, the penalties under section 69C of the Value Added Tax Act 1994, on the footing that the transactions were connected with the fraudulent evasion of VAT. On review HMRC accepted that the appellant's sole director, Mr Stephen Pallister, neither knew nor should have known of that connection, but maintained that Mr Moshin Darr, a self-employed consultant engaged by the appellant, knew or should have known, and that his knowledge was attributable to the company. The appellant accepted before the First-tier Tribunal that the transactions were connected with fraudulent VAT losses elsewhere in the supply chains. The First-tier Tribunal found that Mr Darr knew, alternatively should have known, of the connection, that his knowledge was attributable to the appellant, and that reasonable steps had not been taken; it dismissed the appeal in its entirety. With permission of the Upper Tribunal granted by Judge Greenbank on oral renewal, the appellant appealed on three grounds.