Beigebell Limited (No. 2) v The Commissioners for HMRC

In a VAT MTIC appeal, the legal burden of proving actual or constructive knowledge remains on HMRC, although an evidential burden may arise for the taxpayer to answer a prima facie case. An appellate tribunal will not interfere with factual findings unless the tribunal below applied an erroneous legal approach or reached a conclusion unsupported by the evidence. Errors of law do not require remittal where the appellate tribunal is satisfied that they were immaterial and could not have affected the result. Adequate reasons are assessed by reference to the matters critical to the determination of the parties’ substantive rights.

Beigebell appealed against the decision of the First-tier Tribunal in Beigebell Ltd (No. 2) v HMRC [2023] UKFTT 363 (TC). The FTT had dismissed Beigebell’s appeal against HMRC’s refusal to repay input tax and had upheld an assessment, finding that Beigebell knew, or alternatively should have known, that purchases of memory cards and Samsung SSDs were connected with VAT fraud.

The appeal challenged the FTT’s approach to the burden of proof, its treatment of excluded evidence, the adequacy of its reasons, and several findings of fact. The central questions were whether the FTT had made errors of law and, if so, whether any error was material.

1. Appeal dismissed. The FTT had correctly understood that HMRC bore the legal burden of proving the relevant Blue Sphere elements, including actual knowledge or means of knowledge. References to Beigebell bearing the burden of proving its positive case concerned only the evidential burden. The FTT’s conclusion that HMRC had discharged its burden was explicit and correct (paras [16]–[24]).
2. The FTT erred in law by attributing a purpose to an application to adduce excluded evidence without giving the appellant an opportunity to explain that purpose. It also erred in treating part of Mr Griffiths’ evidence as unreliable. Those errors were immaterial. The FTT had identified numerous other inconsistencies and evidential difficulties, and the Upper Tribunal was confident that the same conclusions would have been reached without the errors (paras [25]–[43], [62]–[78]).
3. The FTT gave adequate reasons for its finding of actual knowledge. The reverse-charge enquiry was relevant to alternative issues concerning awareness and blind-eye knowledge, but the critical reason for the denial of input tax was the adequately explained finding of actual knowledge. Reasons need address the matters critical to the parties’ substantive rights (paras [44]–[52]).
4. The challenge under Edwards v Bairstow [1956] AC 14 failed. The FTT’s finding that Mr Patel had not arranged the transactions was supported by the totality of the evidence, including the absence of deal documentation and anomalies in the evidence. The fact that Beigebell communicated with both supplier and customer did not compel the contrary conclusion (paras [53]–[61]).
5. The FTT was entitled to distinguish honesty from reliability and could find Mr Griffiths honest but unreliable. The errors identified did not justify setting aside the decision. The appeal was dismissed in full (paras [62]–[81]).

• Upper Tribunal (Tax and Chancery Chamber): appeal against Beigebell Ltd (No. 2) v HMRC [2023] UKFTT 363 (TC) dismissed. The decision under appeal followed an earlier remittal in HMRC v Beigebell Limited [2020] UKUT 176 (TCC).
• First-tier Tribunal: appeal against HMRC’s refusal to repay input tax dismissed and assessment upheld.