This was a decision of HMRC to disallow input tax claimed by the Appellant in relation to purchases of scrap metal. The FTT decided that although the due diligence carried out by the Appellant left something to be desired the number of transactions where they had purchased stock and which had led to a failure to declare Vat was 403 from 7 suppliers meaning that the number of deals in question represented 2% of the company’s total deals and that as the deals were very similar to the other 98% the Appellant had a justification for failing to rigidly apply the due diligence protocols that were put in place with their accountants. 

Although HMRC are highly successful in these “Kittel” appeals, this case does demonstrate that there is high burden on them to prove their case, which is to be expected when they say that transactions in question are “connected to fraud”.