Retailer Atlantic Electronics is the latest to be denied a tax refund after having been caught up in a carousel fraud chain of companies.
A judgement on the online reseller's appeal against HMRC's decision to deny input tax credits worth £1,128,137.50 relating to VAT periods in 2006 was published this week.
Atlantic, a family company founded in 1972 as a repairer and seller of second-hand TV and radio equipment, today is a thriving broad-based consumer electronics retailer with three stores in north-west London and a long list of vendor partnerships including with Sony, Samsung, Canon and Panasonic.
The retailer had become caught up in a supply chain involving missing-trader VAT fraud that resulted in a conviction back in 2011, where a jury trial at Southwark convicted Shabir Ahmed, director of Morganrise, of two offences of conspiracy to cheat the public revenue.
Ahmed was sent to jail for 48 months.
HMRC had as usual denied companies in the supply chain recourse to input tax credits relating to allegedly suspect purchases, but Atlantic Electronics appealed the decision and a hearing was held in March 2013.
Atlantic's appeal turned primarily on whether the evidence against Ahmed that indicated his company's dishonest "contra-trader" behaviour in the supply chain was sufficiently strong.
However, the Court of Appeal (Civil Division) has dismissed Atlantic's appeal.
Lord Justice Beatson agreed with the appellant that there had been "deficiencies" in the approach of the Upper Tribunal in 2012 to the case, but ruled they were not however sufficient to change the decision, especially since the First Tier Tribunal itself had not made an error of law.
Lady Justice Arden, also presiding, agreed with his conclusion.
"[For example] the appellant points out that the goods traded in by it were not the same as those traded in by Morganrise in the transactions on which Mr Ahmed was convicted. That is not, however, a conclusive point as the parties to an MTIC fraud are not likely to be concerned by the nature of the goods," she said in Point 79 of dismissing the appeal.
The appellant had also held that HMRC had not made an application and included the Ahmed convictions as evidence early enough.
However, Justice Arden said: "HMRC could not have sought to put them in evidence much earlier than the date of their application [and] HMRC had given notice that it would rely on the convictions of Mr Ahmed if obtained and that it would seek to put in further evidence."
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