No Court of Appeal for you! Judges uphold Aria PC firm VAT fraud ruling
Plus: A year ago today El Reg changed the law
Aria Technology has been denied permission to appeal against a tax court's ruling that the PC and components dealer diddled HMRC out of £750,000 of VAT through a VAT carousel fraud.
The news comes on the anniversary of the company trying and failing to gag The Register from reporting about its scheduled 2018 appeal in the Upper Tribunal's Tax and Chancery Chamber, a specialist tax disputes court.
Having had that first appeal dismissed by the Upper Tribunal, Aria Technology Limited (ATL) has now been denied permission to take it up the legal chain to the Court of Appeal.
ATL, the company which was then behind well-known retail brand Aria PC, had taken part in a so-called VAT carousel fraud in the earlier part of this decade. VAT carousel fraud is also known as a Missing Trader Intra-Community fraud ("MTIC fraud", as the lawyers call it). Aria was involved in supply chain with other fraudsters that cheated the taxman out of £758,770.69, claiming a repayment of more than £300,000.
VAT carousel fraud explained
Europol, the EU police force, explains VAT carousel fraud as follows: "More complex cases of VAT fraud are typically known as carousel frauds. As part of these fraud schemes, goods are imported and sold through a series of companies before being exported again. The first company in the domestic chain charges VAT to a customer, but does not pay this to the government, becoming what is known as a 'missing trader'. The exporters of these goods claim and receive the reimbursement of VAT payments that never occurred."
Mr Justice Roth, the Upper Tribunal judge who threw out Aria's Upper Tribunal appeal attempt, ruled last November: "Aria accepted in its appeal before the FTT that there was a tax loss to HMRC which resulted from fraudulent evasion of VAT, and that its transactions were connected with that fraudulent evasion."
Claiming that it was innocent, Aria had tried – and failed – to argue that it was an unwitting part of the fraudulent trader chain. Both tribunals found that ATL had been repeatedly warned by HMRC about being able to show proof of carrying out due diligence before trading with new entities – something that wasn't done. ATL bought large quantities of CPUs and TFT monitors from limited companies it had never traded with before, reselling them on to other companies with which it had never traded before in circumstances that were "too good to be true", Mr Justice Roth ruled.
Aria Taheri, ATL's MD and sole registered director, said in a lengthy statement to us: "Having been dormant for a few years, ATL is challenging HMRC as a matter of principle. The appeal has many stages – first it has to be done by the judge who made the report and the decision (no judge will contradict his/her own decision). It is only in the next stage that the case is referred from High Court to another judge in the Court of Appeals. The appeal is still ongoing."
He added: "To use a metaphor, a judge is like a referee in a football game. In the case of ATL, the referee decided that its goalpost will be double the length and height of the other side."
Taheri's full statement, all 17 paragraphs of it, is reproduced overleaf.
Open justice
Aria Taheri tried and spectacularly failed to stop El Reg seeing legal documents filed in his appeal case which would have allowed us to report fully about the existence of ATL's Upper Tribunal appeal. In a special hearing, Judge Greg Sinfield ruled that the Upper Tribunal had the power to reveal those papers to journalists on request – contrary to what Taheri had claimed.
Judge Sinfield's ruling, handed down a year ago today, set a binding legal precedent used by reporters ever since. It's even in the standard media law textbook, McNae's Law for Journalists (download the PDF at that link and search for "The Register"), meaning generations of reporters will forever associate Aria Technology Ltd with tax-dodgers trying and failing to hide from the light of public scrutiny.
Aria's full statement
Aria Taheri, MD of Aria Technology Ltd, sent us this statement when we asked him to comment on permission to take his company's case to the Court of Appeal being refused.
The Register does not endorse or support its contents, nor have we fact-checked them. We remind readers of the context of the below passage, written by the sole director of a company that exhausted HMRC's internal appeal processes before going through two layers of the legal system, losing at every stage before having permission to take it even higher refused.
We note the use of the word "emotive" to describe the judge – and fail to understand why Taheri would say she would be more emotional in her decision than anyone else. We also point out that the director has no standing to discern whether the judge is well-trained or has adequate time management skills, and that the Upper Tribunal ultimately ruled that "it was not erroneous in law for the [First Tier Tribunal] to express an overall view of Dr Findlay's reliability and truthfulness without explaining why it rejected the various detailed points on which Aria had alleged Dr Findlay was misleading."
Here in the UK, we live in a democracy. Checks and balances are put in place to ensure everyone is treated as fairly as possible.
First of all, this is a civil Action brought by a dormant company – Aria Technology Ltd against an assessment made by HMRC to claim the tax rebate that it is due.
In civil actions the judge has to decide on facts of the case and if one party has over 51% favoured by the judge that party wins.
In most cases, the judge has to justify his decision through a written report outlining the facts of the case.
It took Judge Jennifer Blewitt well over a year to write her report.
Judge Blewitt's report contains many factual errors, inaccuracies, and contradictions. These are all evidenced by the transcripts. Many parts of her report seem to have been copy and pasted from other decisions - irrelevant to this case.
HMRC's witness Dr Findlay, effectively said that to describe a product as an "OEM CPU" is another indicator that ATL's due diligence was incorrect (see the transcript). This is absolutely untrue - we have been describing a none retail CPU as OEM for as as long as I have been in IT business - over 25 years. Every other IT business that I know, describes it the same.
Incredibly, Dr Findlay's report also contains tables that not add up, coming up with wrong figures! How on earth did he get his Phd? The judge then described Dr Findlay's report as accurate!!
To use a metaphor, a judge is like a referee in a football game. In the case of ATL, the referee decided that it's [sic] goalpost will be double the length and height of the other side.
Her decision seems to be based on either on an emotive bias, lack of time and resources (is her caseload too much?), lack of training, all three or some other unknown factor. Either way the decision is questionable at best. Thus forming the grounds for appeal.
Again, both suppliers that ATL purchased the goods from were audited by HMRC and their taxes repaid to them. It is the suppliers above them who have defaulted. ATL's due diligence was adequate at the time and in line with HMRC guidelines. To expect ATL to pay the taxes that HMRC failed to collect is the subject of the current challenge.
Having been dormant for a few years, ATL is Challenging HMRC as a matter of principle. The appeal has many stages – first it has to be done by the judge who made the report and the decision (no judge will contradict his/her own decision). It is only in the next stage that the case is referred from High Court to another judge in the Court of Appeals. The appeal is still ongoing.
It is important to note that ATL is looking for a fair decision rather than a win and is asking for the case to be reheard. HMRC's legal costs which after another challenge, were halved [sic], are now being paid by ATL.
Judge Blewitt Made a decision recently when Lorraine Kelly won her tax case. If Judge Blewitt used the same standard of reporting as she did with ATL, there would have been an outcry.
Having operated for the last 25 years, paying millions of pounds worth of taxes - win or lose, ATL deserves a fair decision based on a fair report.
Due Diligence means: "reasonable steps taken by a person to avoid committing a tort or offence".
The question is: did HMRC do their own Due Diligence when giving VAT numbers to defaulting suppliers? Did the HMRC officers [excised], with all the resources at their disposal do their Due Diligence when they repaid the rebate due ATL's two immediate suppliers?
The case is no longer continuing. ®