In Pacific Computers v HMRC [2015] UKFTT 0026 (20 January 2015) the FTT found that the taxpayer was entitled to the recovery of input tax despite the fact that he had been involved in transactions related to MTIC fraud.
It was established that MTIC fraud had taken place. The issue was whether the directors of Pacific Computers knew or ought to have known of the connection with fraud as this would lead to the denial of the company’s input tax recovery on the relevant transactions (Mobilix [2010] EWCA Civ 517). This would be established – and the onus of proof was on HMRC ¬– if the only reason for the taxpayer to participate in the transaction was fraud.
The FTT found that HMRC’s case ‘came nowhere near even satisfying a low threshhold’. Actual knowledge of fraud had not been shown and the directors’ reliability and credibility had...
