VNS Waste Solutions Limited v The Commissioners for HMRC

Facts

VNS Waste Solutions Limited appealed to the First-tier Tribunal against two HMRC decisions: deregistration for VAT, later withdrawn, and a decision and assessment denying input tax of £1,818,418 across three VAT periods. HMRC's Further Amended Statement of Case put its primary case on the principles in Kittel, namely that VNS knew or should have known that the supplies were connected with the fraudulent evasion of VAT. In the alternative, HMRC said there were no taxable supplies at all. The transactions formed a circular chain, and it was common ground that if no supplies were made to VNS, none were made by it, so the assessment would fail. VNS applied to debar HMRC from taking further part, arguing that HMRC's own pleaded case was one of no supply and so could not succeed. The First-tier Tribunal refused the application in a decision issued on 27 November 2024, holding that HMRC were entitled to plead the two cases in the alternative. It refused permission to appeal, but the Upper Tribunal granted permission on six grounds, which VNS pursued before Marcus Smith J and Judge Mark Baldwin.