MTIC Fraud Appeal – Airtime
MTIC Fraud Appeal – Airtime
Case Details
Case: TC/2017/02223, PTGI-ICS Limited v HMRC
Input tax denied: Approximately £19.2 million across VAT periods 06/15 to 03/16
Judge: Asif Malek
Hearing: 13-day hearing in September 2021
Evidence: 12 electronic evidence bundles comprising approximately 5,000 pages, with 5 witnesses giving evidence
Counsel: Mr Bedenham, instructed by CTM
The Appeal
HMRC had denied input tax of approximately £19.2 million on the basis that PTGI-ICS Limited knew or should have known that its transactions in the airtime sector were connected with MTIC fraud.
Decision
The appeal was allowed. The Tribunal found that the directors of PTGI-ICS Limited did not know, nor should they have known, of any connection between their transactions and fraud.
Key Legal Principles
The distinction between suspicion and legal proof was critical to the outcome of this case. The Tribunal reinforced the principle that a heightened risk of fraud in a particular sector is insufficient, on its own, to deny input tax.
HMRC must establish that the “only reasonable explanation” for the circumstances of the transactions was a connection to fraud. Mere suspicion or the existence of risk factors in the supply chain does not meet this threshold.
CTM’s Track Record
This case represented CTM’s 8th successful MTIC appeal and the 2nd within 5 months, further demonstrating the firm’s expertise in defending businesses against fraud allegations in complex VAT disputes.
Frequently asked questions
What was the PTGI-ICS Limited v HMRC case about?
In case TC/2017/02223, HMRC denied approximately £19.2 million of input tax across VAT periods 06/15 to 03/16, alleging that PTGI-ICS Limited knew or should have known its airtime transactions were connected with MTIC fraud. The appeal was heard over 13 days in September 2021 before Judge Asif Malek, with Mr Bedenham as counsel instructed by CTM.
Is a high risk of fraud in a sector enough for HMRC to deny input tax?
No. In this case the Tribunal reinforced the principle that a heightened risk of fraud in a particular sector is insufficient, on its own, to deny input tax. The distinction between suspicion and legal proof was critical to the outcome, and risk factors in the supply chain did not meet the required threshold.
What must HMRC prove to deny input tax in an MTIC appeal?
HMRC must establish that the only reasonable explanation for the circumstances of the transactions was a connection to fraud. Mere suspicion, or the existence of risk factors in the supply chain, does not meet this threshold. In the PTGI-ICS appeal, the Tribunal found that the directors did not know, nor should they have known, of any fraud connection.
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