Excel RTI Solutions v Revenue & Customs Commissioners (2015)
The standard of proof to be satisfied by Customs before deciding that a trader knew the transactions in which it was participating were connected with the fraudulent evasion of VAT was the civil standard of the balance of probabilities.
A trader appealed against a decision that it could not deduct input tax that it had incurred in 21 transactions because it had known, or should have known, that the transactions were connected with missing trader fraud and with the fraudulent evasion of VAT.
The trader had been one of six companies involved in back-to-back buying and selling of mobile phones. The First-tier Tribunal dismissed the trader's appeal. It found that most of the companies involved would not have had the resources to buy the phones without immediately receiving the money from their subsequent buyers. That synchronisation of funding, along with other factors, led the tribunal to conclude that the trader had actual knowledge of the connection with fraud; it was therefore unnecessary to determine whether the trader had constructive knowledge.
The trader submitted that (1) the tribunal had concluded on the balance of probabilities that it had known of the fraud whereas, applying Unipetrol as v European Commission (T-45/07) EU:T:2011:359, the tribunal needed to have had a firm conviction that it had known; (2) the finding of actual knowledge was perverse, as the evidence was incapable of supporting that finding.
(1) Entitlement to the right to deduct input tax would be denied where it was ascertained that the taxable person knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT, Kittel v Belgium (C-439/04)  S.T.C. 1537 applied. The standard of proof to be satisfied by Customs in relation to Kittel knowledge was the civil standard of the balance of probabilities, Mobilx Ltd (In Administration) v Revenue and Customs Commissioners  EWHC 133 (Ch) applied. Therefore, although in the instant case there had been no issue before the tribunal about the standard of proof, if it was assumed that the tribunal had applied the civil standard, it had been correct to do so. The trader's argument that EU law required its own, different standard to be applied in such a case was misconceived. Whilst it was true that the Kittel criteria were creatures of EU law, that was very far from saying that when national courts assessed whether those criteria were established as a matter of fact, they had to apply an EU standard of proof. The well-established principle of procedural autonomy meant that, in the absence of a direction from the Court of Justice of the European Union, or other binding EU rule, national procedural and evidential rules were normally applicable when national courts were enforcing EU rights and obligations, Rewe Zentralfinanz eG v Landwirtschaftskammer fur das Saarland (33/76)  E.C.R. 1989, Courage Ltd v Crehan (C-453/99)  Q.B. 507 and Bulicke v Deutsche Buro Service GmbH (C-246/09)  E.C.R. I-6999 applied and Unipetrol distinguished (see paras 22, 28, 38-40, 43 of judgment). (2) There had been objective evidence before the tribunal on the basis of which it had been clearly entitled to reach the conclusion that the trader knew that the transactions were connected with the fraudulent evasion of VAT. That conclusion was not perverse (para.68).