Following their success in the VAT Tribunal with the Livewire case, Vantis hosted a seminar in central London last Friday, 1st February, in order to provide a forum for interested parties to exchange views and hear from the team responsible for the Livewire victory. Well over 150 delegates attended from all walks of business life, but all with one thing in common – everyone was a victim of Customs’ “extended verification” policy and had either had VAT repayments denied, or awaited decisions.
Speakers included Don Mavin, Martin O’Neill and Allan Brown from the Vantis Customs Investigations & Litigation Team, David Scorey and Jern-Fei Ng of Essex Court Chambers (the legal team who successfully argued and won the case before the Tribunal) and special guest Dr. Mike Cheetham of Bond House Systems Limited, who provided an overview of the decision’s implications from the traders’ perspective.
The delegates heard first from Martin O’Neill, the Vantis Consultant who successfully ran the case, and Martin provided a first-hand account of the sort of intense preparation necessary, and the vast quantities of documentation associated with cases of this type. No-one was left in any doubt that today’s appeal process must be a joint effort involving close interaction and consultation between client, adviser and Counsel.
Martin set out for the delegates the long and winding road which Livewire were forced to travel before finally securing their victory - from VAT dispute to Judicial Review, from Customs’ decision to battle after battle to force Customs to disclose details of their investigations and to prove their allegations of fraud.
The burden of proof and the obligations placed upon Customs to show that a fraud has been committed were the principal themes of David Scorey’s address. As a barrister well-versed in civil litigation of all types, David explained that every means of knowledge case will inevitably collapse unless Customs can prove that there has been a tax loss which is permanent and that the tax loss is attributable to a fraud committed by a particular person or company.
Although this is a basic principle, it is, surprisingly, one which has never before been fully argued, with previous Tribunals and Appellants having been too ready to accept Customs’ assertions that a tax loss automatically signifies a VAT fraud, and that the existence of such a fraud can be proven so simply and quickly. It was a feature of the Livewire case that the legal team put Customs fully to proof on every single aspect of the alleged fraud and refused to view the burden of proof borne by Customs as little more than a mere formality.
Customs, understandably, are reluctant to accept their evidential responsibilities and, as David made clear, “the gloves are now off, and these cases cannot be conducted in the gentlemanly way preferred by the Tribunals”. Fraud is a serious allegation, and an Appellant must be prepared to fight long and hard in order to force both Customs and the Tribunal to focus on the real issues at stake.
Jern-Fei Ng then dealt with subjects which have long been in the forefront of everyone’s minds – due diligence and how a company which may be six or seven steps removed from the fraudster can ever be shown to know of a fraud, and just what could be considered adequate due diligence. This was a central argument in the Livewire Tribunal case, and, as we know, the Chairman found that even completely perfect due diligence procedures would never have alerted Livewire to the existence of the fraud.
Allan Brown addressed the delegates on what the Livewire decision is likely to mean to them and their companies – whether decisions had been received or were still awaited. The main message from Allan – and, indeed, from all of the afternoon’s speakers – was that Customs need to be kept under pressure.
The Livewire decision represents the first victory of its kind, and businesses should take full advantage of it. If an appeal has not yet been submitted, then it should be prepared and submitted as a matter of urgency. Where an appeal has been lodged, Customs should be pushed for disclosure of the full details of their case. Either way, this is not a time simply to sit back and wait – nor should Appellants or their advisers simply take the view that their cases will inevitably be stood over if Customs decide to appeal the Livewire decision in the High Court.
Mike Cheetham rounded off the event with an overview of the implications of the Livewire decision from the traders’ perspective, drawing on his own experiences with Bond House. Once again, the message was clear – together with their advisers and representatives, companies need to work hard to bring their cases up to “the Livewire standard”, and this will be a long and labour intensive process. But, ultimately, as we have seen, it can bear fruit.
During a lively question and answer session, the speakers were able to dispel several of the rumours which are inevitably circulating throughout the market in the aftermath of such an important legal breakthrough. For example, delegates were reassured that they are not obliged to instruct a solicitor in order to reclaim their costs following a VAT appeal. This misconception has, understandably, caused a great deal of concern amongst businesses seeking to submit VAT appeals, but Vantis has already fought and won this argument with Customs – any Appellant instructing us in the conduct of a VAT appeal can rest assured that our costs are recoverable.
Some delegates were also anxious to confirm rumours that Customs are seeking to appeal the Livewire decision to the High Court - and, in fact, there was speculation that one of the grounds for such an appeal would be that the Tribunal had been wrong in law to accept the existence of a legitimate grey market. As David Scorey pointed out, however, it was actually Customs themselves, when faced with the evidence gathered by Livewire and Vantis, who conceded that the grey market exists, and the Tribunal Chairman, Dr. Avery-Jones, found “as a matter of fact” that there was a legitimate grey market. As any lawyer knows, appeals to the High Court are based upon questions of law, rather than matters of fact.
The delegates took away with them the message that the Livewire decision has significantly altered the landscape in which VAT appeals will be heard in the future. It is, of course, only one decision, and other Tribunals may choose not to follow its lead. Each subsequent decision will bring with it a new set of challenges.
However, we hope that Livewire’s victory demonstrates that with detailed preparation, perseverance and the combined participation of the client, first-rate Counsel and specialist VAT advisers, a meaningful and potentially successful challenge can be made against the denial or withholding of input tax by Customs under the current extended verification exercise .
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