Jeneruhl Trade Limited & Anor v The Commissioners for HMRC

This is a decision on a preliminary issue relating to time limits on VAT assessments. The question we must decide is whether assessments for VAT periods 07/19 and 10/19, notified to the Appellants on 9 November 2021, were made within the time limit set out in section 73(6)(b) of the Value Added Tax Act 1994 (“VATA 1994”). This depends on whether they were made within one year after evidence of facts, sufficient in the opinion of HMRC to justify the making of the assessments, came to their knowledge.

We have decided on the facts of this case that the assessments were made in time, for the reasons we give below.

We had a 2,268-page hearing bundle which included HMRC’s decisions and assessments under appeal, the grounds of appeal, HMRC’s statement of case (an original version dated 29 August 2023 and an amended version dated 8 December 2023), copies of Tribunal correspondence and directions, and correspondence between the parties. We also had a 132-page authorities bundle containing relevant statutory provisions and case law.

There was a previous Tribunal hearing to decide various case management matters that had arisen in this appeal. After that hearing, the Tribunal directed HMRC to disclose various documents to the Appellants. The hearing bundle included the Tribunal’s decision dated 7 August 2024, and the documents disclosed by HMRC after that previous hearing.

Ms Jennifer Gutzmore, who is an HMRC officer, provided a witness statement, gave oral evidence, and was cross examined by Mr Watkinson. She made one oral correction to her witness statement, but otherwise this stood as her evidence in chief. We accept the truthfulness of her evidence and have relied on it for certain of our findings of fact below.

The First Appellant, Jeneruhl Trade Ltd (“Jeneruhl”), was incorporated on 20 October 2016, and applied for VAT registration on 31 October 2016. At that time, the company had a different name and on the application for VAT registration its business activity was described as landscape gardening.

Jeneruhl’s VAT returns showed that the company made no taxable supplies until period 07/19. In that period, Jeneruhl was trading in scrap metal, plastics and second-hand clothing.

The Second Appellant, Mr Nayar, became a director of Jeneruhl in December 2016.

On 17 June 2019, HMRC officers visited Mr Nayar to discuss the nil VAT returns submitted by Jeneruhl up to that point. Mr Nayar said that Jeneruhl had not begun trading until May 2019.

A further meeting took place between Mr Nayar and HMRC officers on 28 November 2019, at which Mr Nayar provided various business records relating to Jeneruhl. The HMRC officers who attended this meeting made a note that they had concluded that Jeneruhl was an “MTIC buffer”.

On 23 December 2019, HMRC requested various business records from Jeneruhl relating to VAT periods 07/19 and 10/19.

On 11 February 2020, Jeneruhl’s accountant provided HMRC with ten folders of information relating to VAT periods 07/19 and 10/19. These included bank statements, sale and purchase ledgers, and sale and purchase invoices.

On 7 May 2020, HMRC requested records relating to the 01/20 period. These included purchase and sale invoices, bank statements, VAT accounts, and a list of suppliers and customers.

On 21 May 2020, HMRC sent Mr Nayar a list of questions including information on Jeneruhl’s business activities and traded commodities, a list of its customers and suppliers, and information on due diligence carried out by Jeneruhl on new customers and suppliers.

On 15 September 2020, Officer Jennifer Gutzmore was appointed as HMRC’s case officer in relation to Jeneruhl.

On 22 September 2020, Officer Gutzmore sent Mr Nayar and his accountant a further copy of the information sought on 21 May 2020. An information notice under Schedule 36 of the Finance Act 2008 was issued on 1 October 2020, requiring the production of this information. This notice was subsequently withdrawn.

On 22 October 2020 Officer Gutzmore issued “tax loss letters” relating to VAT period 10/19 in respect of four of Jeneruhl’s suppliers: Grovebirch Ltd ("Grovebirch"), Patchwork Design Ltd ("Patchwork"), PLM Traders Ltd ("PLM") and Midland Express Wholesale Ltd (“Midland Express”). These letters listed purchase invoices issued by Jeneruhl that had been identified in connection with transaction chains that commenced with a defaulting trader. The letters stated, in each case, the resulting loss to the public revenue.

The letters made reference to the Kittel principle, and stated that Mr Nayar should satisfy himself that he had undertaken sufficient due diligence regarding the integrity of his suppliers, customers and underlying supply chains. Officer Gutzmore issued further tax loss letters in the following months in respect of a number of Jeneruhl’s other supplies including Eco-Friendly Ltd (“Eco-Friendly”), Ortem Supplies Ltd ("Ortem Supplies") and Bailey’s Trading Ltd (“Bailey’s Trading”).

On 18 November 2020, Officer Gutzmore wrote to Jeneruhl’s solicitor, Mr Whyatt, requesting copies of all the purchase invoices for VAT period 10/19, and some further records in relation to that period. She explained in her letter that £786,670 of input tax had been claimed in period 10/19, but that the purchase invoices she held only added up to a total of £664,042.48. She therefore wanted to see all the invoices to verify the amount of the claim.

On 30 November 2020, Mr Whyatt replied to say that his client had already provided full records for period 10/19, during HMRC’s visit on 11 February 2020. After a further exchange of correspondence, Officer Gutzmore allowed Jeneruhl until 18 January 2021 to provide the additional records she had requested.

On 27 January 2021, no further records or information having been provided, Officer Gutzmore wrote to Mr Nayar setting out the information and documents required in relation to six VAT periods including 07/19, 10/19 and 01/20.

On 4 February 2021, Mr Whyatt provided VAT reports, bank statements, and purchase and sale invoices for the VAT periods 01/20, 04/20, 07/20 and 10/20. Officer Gutzmore was unable to open some files relating to 01/20 that had been provided in zipped folders; Mr Whyatt supplied unzipped versions on 8 February 2021.

Further hard copy records were supplied to HMRC’s offices in Birmingham on 19 February 2021, but a number of documents requested by Officer Gutzmore remained outstanding, including the apparently missing invoices for VAT period 10/19.

On 25 February 2021, Officer Gutzmore requested information relevant to VAT period 01/20. This included due diligence information for three of Jeneruhl’s suppliers: PLM, Green Energy Links (UK) Ltd (“Green Energy”), and Ortem Supplies, as well as a customer, Tandem Metallurgical Ltd ("Tandem Metallurgical"). HMRC cancelled PLM’s VAT registration on 18 February 2021, and cancelled Green Energy’s VAT registration on 23 September 2021.

Mr Nayar provided some records on 4 March 2021: a lease agreement, a rent invoice, a transport invoice and a list of transactions with Tandem Metallurgical.

On 15 March 2021, Officer Gutzmore requested further documents including invoices in relation to VAT period 01/20.

On 6 May 2021, Officer Gutzmore sent Mr Nayar and Mr Whyatt a letter asking further questions on matters including Mr Nayar's previous experience and other trade information such as pricing, advertising, contracts, company vehicles and present-day trading. Mr Whyatt replied that other than in relation to current trading activities, his client had answered these questions already.

On 13 May 2021, Officer Gutzmore submitted to her manager a “Kittel and Ablessio principle policy submission template”, which was also referred to as a “means of knowledge” submission. This was an internal HMRC document in which Officer Gutzmore provided a range of information relating to Jeneruhl and the Kittel test, which we understood was intended to assist the officer’s manager to assess the strength of HMRC’s case. Following comments, Officer Gutzmore completed an updated version of this template on 1 July 2021. Her manager endorsed the submission (for HMRC’s internal purposes) on 15 July 2021.

At some point between March 2021 and June 2021, Officer Gutzmore conducted “open-source” searches, on the Companies House website and on Google Maps, relating to Jeneruhl’s suppliers. The purpose of these searches was disputed, and we make further findings about them below.

On 13 July 2021, Officer Gutzmore requested a breakdown of the monthly input tax figures for period 10/19. Mr Whyatt provided this information on the same day. Based on the evidence given by Officer Gutzmore in cross-examination, however, we find that this breakdown had already been given to HMRC as part of the information provided on 11 February 2020.

On 5 November 2021, Officer Gutzmore issued a Kittel decision letter to Mr Nayar. This was followed on 9 November 2021 by a notification of assessment, again issued to Mr Nayar.

HMRC’s decision, set out in the Kittel decision letter, was to deny Jeneruhl’s claim to deduct input tax of £275,138 for VAT period 07/19, £640,483 for VAT period 10/19 and £249,118 for VAT period 01/20. This decision was made on the basis that the transactions were associated with the fraudulent evasion of VAT and that Jeneruhl knew or should have known that this was the case.

The letter of 5 November 2021 set out some of the evidence HMRC had taken into account in reaching their decision. It is not disputed that some of the evidence listed in the letter was known to HMRC more than a year before the notification of assessment (ie before 10 November 2020). The letter stated, for instance, that Jeneruhl achieved a profit on every supply as soon as it began trading, despite Mr Nayar having no trading history in scrap metals, and without Jeneruhl seeing or inspecting the goods in which it was trading. It is not disputed that HMRC knew this before 10 November 2020.

HMRC’s decision letter included the following paragraph:

“Trader stated he had done due diligence consultancy work and was familiar with the known risks of someone trading in that sector, yet;

•

Information on Companies House website shows suppliers, Midland Express Wholesale Ltd, Grovebirch Ltd, Bailey's Trading Ltd, PLM Traders Ltd and Ortem Supplies principal place of business (PPOB) as residential premises.

•

There is little or no evidence on Companies House of some suppliers having any knowledge or trading experience in scrap metal or second-hand clothes.

•

Searches on Google Maps have shown that the post code shown on the Patchwork Design Ltd invoices did not relate to the address on the invoice, the PPOB of Color Front Ltd and Green Energy Links UK do not exist and the PPOB of Eco-Friendly Ltd was a supermarket and gym

•

No evidence has been provided of any action taken regarding any adverse findings on a credit check.”

On 14 December 2021, following the input tax denials, HMRC notified Jeneruhl under VATA 1994, s 69C of penalties of £349,421.70. On 1 March 2022, HMRC notified Mr Nayar under VATA 1994, s 69D that he was personally liable to pay these penalties, on the basis that the actions of the company which led to the penalties were caused by him, as a company officer.

The Appellants filed their grounds of appeal against the input tax denials, penalties and company officer liability notice on 15 March 2022.

A case management hearing took place on 5 July 2024. The Tribunal’s decision was subsequently published as Jeneruhl Trading Ltd and another v HMRC [2024] UKFTT 735 (TC). This concerned a debarring application by Mr Nayar, and both Appellants’ applications for further and better particulars, disclosure, and case management directions in relation to their case on time limits. The debarring application and the application for further and better particulars were rejected, but the application for specific disclosure was allowed to the extent that the Tribunal directed disclosure by HMRC of:

Following the making of these directions, HMRC disclosed additional documentation running to over a thousand pages, all of which was included in the bundle for the hearing before us on 8 December 2025.

HMRC have the power to make VAT assessments under VATA 1994, s 73(1) and (2) as follows.

“(1)

Where a person has failed to make any returns required under this Act (or under any provision repealed by this Act) or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him.

(2)

In any case where, for any prescribed accounting period, there has been paid or credited to any person–

(a)

as being a repayment or refund of VAT, or

(b)

as being due to him as a VAT credit,

an amount which ought not to have been so paid or credited, or which would not have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly.”

Relevant time limits are set out at VATA 1994, s 73(6):

“(6)

An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following–

(a)

2 years after the end of the prescribed accounting period; or

(b)

one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge,

but (subject to that section) where further such evidence comes to the Commissioners' knowledge after the making of an assessment under subsection (1), (2), or (3) above, another assessment may be made under that subsection, in addition to any earlier assessment.”

VATA 1994, s 77 provides a general four-year time limit for assessments (subject to exceptions that are not relevant in this case).

In DCM (Optical Holdings) Ltd v Revenue and Customs (Scotland) [2022] UKSC 26 at [18], the Supreme Court approved the following principles set out by Dyson J (as he then was) in Pegasus Birds Ltd v Comrs of Customs and Excise [1999] STC 95 (“Pegasus Birds”) at p.101:

“1.

The commissioners' opinion referred to in section 73(6)(b) is an opinion as to whether they have evidence of facts sufficient to justify making the assessment. Evidence is the means by which the facts are proved.

2.

The evidence in question must be sufficient to justify the making of the assessment in question (see Customs and Excise Comrs v Post Office [1995] STC 749 at 754 per Potts J).

3.

The knowledge referred to in s 73(6)(b) is actual, and not constructive knowledge (see Customs and Excise Comrs v Post Office [1995] STC 749 at 755). In this context, I understand constructive knowledge to mean knowledge of evidence which the commissioners do not in fact have, but which they could and would have if they had taken the necessary steps to acquire it.

4.

The correct approach for a tribunal to adopt is (i) to decide what were the facts which, in the opinion of the officer making the assessment on behalf of the commissioners, justified the making of the assessment, and (ii) to determine when the last piece of evidence of these facts of sufficient weight to justify making the assessment was communicated to the commissioners. The period of one year runs from the date in (ii) (see Heyfordian Travel Ltd v Customs and Excise Comrs [1979] VATTR 139 at 151, and Classicmoor Ltd v Customs and Excise Comrs [1995] V&DR 1 at 10).

5.

An officer's decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223) (see Classicmoor Ltd v Customs and Excise Comrs [1995] V&DR 1 at 10–11, and more generally John Dee Ltd v Customs and Excise Comrs [1995] STC 941 at 952 per Neill LJ).”

The Supreme Court also approved at [19] the following statements by Aldous LJ in the Court of Appeal in Pegasus Birds Ltd v Customs and Excise Comrs [2000] STC 91 at [11] and [15]:

“The relevant evidence of facts is that which was considered, in the opinion of the commissioners, to justify the making of the assessment. The one-year time limit runs from the date when the facts constituting the evidence came to the knowledge of the commissioners.”

[…]

“An opinion as to what evidence justifies an assessment requires judgment and in that sense is subjective; but the existence of the opinion is a fact. From that it is possible to ascertain what was the evidence of facts which was thought to justify the making of the assessment. Once that evidence has been ascertained, then the date when the last piece of the puzzle fell into place can be ascertained.”

Dyson J in Pegasus Birds formulated the test to be applied at page 104d to e as follows:

In Carbondesk Group plc v HMRC [2015] UKFTT 367 (TC) (“Carbondesk”), the Tribunal said at [20]:

In Royal Bank of Scotland plc v HMRC [2017] UKFTT 223 (TC) at [36], the Tribunal set out a three-stage test for determining the time limits issue, which requires the Tribunal to:

“(a)

Identify the last discovered evidence of facts which, in the opinion of the officer making the assessment on behalf of HMRC, actually justified making the assessment;

(b)

To decide whether that opinion was perverse or otherwise Wednesbury unreasonable; and if not, to

(c)

Identify when that evidence was communicated to HMRC.”

In Lithuanian Beer Ltd v HMRC [2018] EWHC Civ 1406, the Court of Appeal held at [27] that the phrase, "sufficient in the opinion of the Commissioners to justify the making of the assessment", is a reference to the opinion actually formed by HMRC at the time when they issued the disputed assessment. At [28], the Court held that one must identify the evidence taken into account by the officer who issued the assessment as the justification for issuing it, and compare this with the evidence of facts which it is said HMRC knew a year or more before the assessment was issued. The Court (Sales LJ) continued:

“Both elements in the comparison turn on the subjective state of mind of HMRC officers regarding what they understand the evidence available to them actually shows. If the "evidence of facts" known to the Commissioners previously was the same as the evidence of facts which led them to form the opinion later on that an assessment was justified (or, on a Wednesbury approach, should have led them to form that opinion), then it will be clear that the Commissioners have sat on their hands and the special, truncated limitation period in paragraph (b) will apply.”

Dyson J in Pegasus Birds at p 102 set out, as a proposition, that the burden is on the taxpayer to show that the assessment was made outside the time limit specified in VATA 1994, s 73(6)(b). In Nottingham Forest Football Club Ltd v HMRC [2024] UKUT 145 (TCC) at [42]-[47], the Upper Tribunal agreed with that proposition and confirmed that in an appeal based on VATA 1994, s 73(6)(b), the burden of showing that the assessment was made outside the time limit is on the taxpayer.

The assessments that were notified on 9 November 2021 were made more than two years after the end of VAT periods 07/19 and 10/19. So far as the assessments relate to those periods, therefore, they were made in time only if they satisfy the requirements of VAT 1994, s 73(6)(b).

The parties agreed that the task for the Tribunal is:

Having decided these matters we must then consider whether HMRC’s failure to make an earlier assessment was perverse or otherwise Wednesbury unreasonable.

Officer Gutzmore raised the assessments on 9 November 2021 on the basis that in her, and HMRC’s, opinion, Jeneruhl had claimed input tax in respect of transactions that were connected with the fraudulent evasion of VAT, and Jeneruhl knew or should have known that this was the case.

In relation to VAT periods 07/19 and 10/19, the transactions in question were with seven allegedly fraudulent defaulting traders: Colorfront Ltd (“Colorfront”), Eco-Friendly, Grovebirch, Midland Express, Patchwork, Bailey’s Trading and Ortem Supplies.

The Appellants contend that HMRC had ample evidence well before 10 November 2020 that the tax losses said to have been occasioned by these seven companies were fraudulent. The evidence available to HMRC in relation to these traders included information gathered at site visits (or attempted site visits), failure to submit VAT returns, a director who was unable to describe the business premises, companies trading in goods which they did not see, businesses trading from residential premises, a director with no known experience in the purported business of the company, and large turnovers immediately following the beginning of trading. Many of these traders had been compulsorily deregistered from VAT by HMRC.

The Appellants further contend that HMRC had all the information on which they based their subsequent assessments on or before 11 February 2020, which was the date on which Jeneruhl’s accountant supplied HMRC with 10 folders of information relating to VAT periods 07/19 and 10/19.

HMRC’s response to these submissions, as set out in their skeleton argument and explained by Mr Way at the hearing, is that this evidence relates to the question of whether these seven traders were involved with the fraudulent evasion of VAT, rather than Jeneruhl’s knowledge of that fraud. HMRC submitted that Officer Gutzmore’s opinion was that there were two elements which had to be in place before the evidence could be considered sufficient to issue the assessments:

According to HMRC, the fact that the seven companies were trading fraudulently was an important and necessary component of what Officer Gutzmore needed to establish to justify making the assessments. However, HMRC submitted that she also needed to establish that Jeneruhl’s transactions were connected with that fraud, and that Jeneruhl knew or should have known that this was the case.

HMRC’s case, as it was presented to us in the hearing, was not about the evidence that the seven companies were fraudulent, but was about Jeneruhl’s (and therefore Mr Nayar’s) knowledge. As already noted, we must determine when the last piece of evidence of sufficient weight to justify the making of the assessments was communicated to HMRC. In the circumstances of this case, we must answer this question by reference to the evidence that Jeneruhl knew, or should have known, that the relevant transactions were connected with the fraudulent evasion of VAT.

The facts which, in Officer Gutzmore’s opinion, justified the making of the assessments were the facts underlying the Kittel decision: that Jeneruhl had claimed input tax in respect of transactions that were connected with the fraudulent evasion of VAT, and Jeneruhl knew or should have known that this was the case.

We have set out below our findings regarding the time at which Officer Gutzmore received evidence of these facts which, in her opinion, was of sufficient weight to justify the making of the assessments.

As regards the pattern of trading, we accept Officer Gutzmore’s evidence that in her opinion, making the assessments required her to review Jeneruhl’s trading activities over the whole of the nine months covered by VAT periods 07/19, 10/19 and 01/20.

In Officer Gutzmore’s view, an important element of HMRC’s evidence concerning Jeneruhl’s knowledge was the way in which that company transacted successively with different defaulting traders, moving on to a new one as each was deregistered from VAT. To build up this picture, Officer Gutzmore needed information from Jeneruhl regarding its sales and purchases. In relation to VAT period 01/20, this information was provided by Jeneruhl’s agent on 4 February 2021.

Although the assessments related to separate VAT periods, Officer Gutzmore regarded Jeneruhl’s transactions in period 01/20 as relevant to the two earlier periods, because these enabled her to build up a picture of Jeneruhl’s trading pattern over the whole nine months. If, say, she had found out that in period 01/20 Jeneruhl had traded with companies that were not fraudulent, this would in her view have cast a different light on the activities in 07/19 and 10/19. The way she expressed this in cross-examination was that she wanted to find out whether Jeneruhl had just been “unfortunate” in its choice of trading partners.

The information received by Officer Gutzmore in February 2021 in relation to VAT period 01/20 related to three defaulting traders: PLM, Green Energy and Ortem Supplies. Ortem Supplies was the only one of these three with which Jeneruhl had also traded in one of the earlier periods. The total volume of Jeneruhl’s trade had also dropped in period 01/20. Nonetheless, Officer Gutzmore regarded the new information as significant because it showed that Jeneruhl’s pattern of trading successively with defaulting traders, moving on to a new one as each was deregistered, continued into period 01/20.

As regards the open-source searches, these involved Officer Gutzmore looking up information on Companies House about the companies with which Jeneruhl had traded. This included the nature of the companies’ businesses, changes in directors and registered addresses, and any information about strike-off actions. She also looked up the addresses associated with each company on Google Maps, to check what could be ascertained about the usage of the relevant premises: for instance whether the address appeared to be retail, industrial or residential, and whether there was any signage.

While there is no contemporaneous record of these searches, and Officer Gutzmore cannot recall exactly when they happened within the period March 2021 and June 2021, we accept her oral evidence that they took place. Mr Watkinson challenged the role these searches had played in HMRC’s decision-making process, but did not put to Officer Gutzmore that they had not happened, so this aspect of her evidence was unchallenged.

We accept Officer Gutzmore’s oral evidence, given in cross-examination, that the reason she conducted these searches was so that she could establish what information was publicly available on these companies, and could therefore have been discovered by Mr Nayar if he had conducted a reasonable level of due diligence. The search results were, therefore, directly relevant to what Jeneruhl knew or should have known about these companies.

Officer Gutzmore discovered that there was a significant amount of information on Companies House that raised questions about the legitimacy of these traders. This included:

Officer Gutzmore also discovered information on Google Maps indicating that addresses associated with Jeneruhl’s trading partners were not the type of premises that would be expected to be occupied by businesses trading in scrap metal, plastics or second-hand clothing. Many of the addresses appeared to be shops or residential premises.

Officer Gutzmore’s view was that these searches were evidence that Jeneruhl knew or should have known that its transactions with these companies were connected with fraud, because Mr Nayar could reasonably have conducted these searches himself, and would then have seen these same results. Officer Gutzmore reasoned that an honest trader who saw these results would have a strong indication that these were not legitimate companies.

The Appellants’ case was that HMRC had evidence before 10 November 2020 that was sufficient in Officer Gutzmore’s opinion to justify making the assessments, and that the evidence she received within the following year did not change this position. Mr Watkinson drew attention to the responses given by the officer in cross-examination. She was repeatedly asked whether she had enough information to make the assessments before she had conducted the open-source searches. In response she declined to say yes or no, but said that the searches formed part of a basket of evidence, which in her view could not be separated into component parts. Mr Watkinson described her responses as evasive, and suggested we should treat her oral evidence with caution.

In our view Officer Gutzmore’s replies were not evasive, but reflected her view that HMRC’s case was based on a basket of evidence, and that she was unable to identify a single piece of evidence that switched the position from one in which she was not able to make the assessments, to one where she had sufficient evidence to do so.

We have based our findings not only on the officer’s oral evidence, but also on her letter dated 5 November 2021 which provides contemporaneous evidence of the reasoning behind the making of the assessments. The letter listed a number of features of Jeneruhl’s trade that had been taken into account by HMRC in deciding to refuse Jeneruhl’s claim to deduct input tax. These features included that Mr Nayar stated he had carried out “due diligence consultancy work” and was familiar with the known risks of someone trading in Jeneruhl’s sector, but that information available on Companies House and Google Maps shows that addresses associated with suppliers were in fact residential premises, and that suppliers had little or no experience of trading in scrap metal or second-hand clothes.

Mr Watkinson criticised this section of the letter because taken literally, some of the searches described do not make sense, for instance the letter refers to the Companies House website showing that some of the suppliers’ addresses were residential, but the Companies House website does not hold information about whether premises are residential. However, we consider it is clear from the surrounding evidence that what Officer Gutzmore was referring to here was that addresses associated with the suppliers (either their registered offices or addresses provided on invoices) could be looked up on Google Maps, on which it could be seen that they were residential premises.

Similarly the letter states that “there is little or no evidence on Companies House of some suppliers having any knowledge or trading experience in scrap metal or second-hand clothes”. Again, taken literally this is not information that is available on the Companies House website. However, the officer’s witness statement makes clear that she was cross checking the directors of the supplier companies to see whether they held directorships in other companies operating in similar sectors. When she found they did not, she drew negative inferences (and took the view that Mr Nayar should have drawn negative inferences) about those directors’ trading experience.

Mr Watkinson submitted that the purpose for which Officer Gutzmore carried out the open-source searches was not to assess Jeneruhl’s knowledge, but to determine whether the tax losses were fraudulent. He referred, in this context, to a letter dated 25 October 2023 from HMRC’s VAT litigation team to Jeneruhl’s solicitors. This letter states that the open-source searches were carried out to consider the financial health and business credibility of the defaulting traders, to make an assessment about whether the tax losses which had been identified were fraudulent. In cross-examination, Officer Gutzmore accepted that she had had input into this letter before it was sent.

HMRC’s case in this matter has changed over time, an issue to which we return below. It is sufficient here for us to note that we place more weight on Officer Gutzmore’s sworn witness evidence, and her contemporaneous letter, than on a letter sent nearly two years later (in October 2023) in the context of active litigation, and which she did not write herself, even if she had some unspecified degree of input into that subsequent letter.

We also note that, if the Appellants are correct that HMRC had formed the view that the suppliers were fraudulent at least by February 2020, it is unlikely that the officer would have been looking for additional evidence to support this aspect of the case in the period between March 2021 and June 2021.

Mr Watkinson further submitted that the “means of knowledge” submissions showed that HMRC did not give the open-source searches or the pattern of trading substantial weight when deciding to issue Kittel assessments. He submitted that these factors were not referred to in this internal document, in response either to questions about whether transactions were fraudulent, or to questions about what the trader knew or should have known. We were shown only one reference to the open-source searches in these submissions, which was given in response to a question about “anything else you [ie the officer completing the template] are relying on to make your case for applying Kittel”.

Again, we have placed more weight on the officer’s witness evidence, and her letter of 5 November 2021, than on the “means of knowledge” submissions. The latter are internal HMRC documents containing large amounts of information running to many pages, making it difficult to discern which aspects of the evidence HMRC regarded as key to their case. The letter of 5 November 2021, by contrast, was a more succinct (three page) encapsulation of the reasons for HMRC’s decision, intended for an external audience and so presenting a more focused version of the factors they had taken into account for this purpose. We would also note that nothing in the “means of knowledge” submissions contradicts HMRC’s case about the role played by the open-source searches, even though they receive little mention.

A further submission made by Mr Watkinson related to what he referred to as HMRC moving the goalposts. HMRC’s case on the time limits issue has changed in some significant respects since they provided their amended statement of case in December 2023. In particular, the amended statement of case contains the same wording, referred to above, that appeared in the letter dated 25 October 2023 from HMRC’s VAT litigation team, stating that the open-source searches were carried out to make an assessment about whether the tax losses which had been identified were fraudulent. By contrast, HMRC’s skeleton argument dated 24 November 2025 made the case that was presented to us at the hearing, that the searches provided HMRC with evidence about the information that would have been available to Jeneruhl had it carried out a basic level of due diligence.

Mr Watkinson’s submission about the allegedly moving goalposts was not that there had been procedural unfairness to the Appellants, but that we should draw negative inferences from the fact that HMRC have changed their case. He submitted that they have had to change their case because the evidence does not support it.

We decline to draw negative inferences from the fact that HMRC have changed their case over time. It is not unusual over the course of litigation for parties to change the way in which they present their case. Our task was to assess the case that was put to us at the hearing. We have formed our own view of the evidence and have described above the basis on which we have made our findings.

We find on the facts that, one year before the assessments were made, Officer Gutzmore’s opinion was that she did not have sufficient evidence to justify making the assessments, but that the additional evidence she received over the course of that year, concerning the pattern of trading and the information from the open-source searches, brought her to a position where she considered she did have sufficient evidence to make those assessments.

As regards the pattern of trading, information about VAT period 01/20 (which we have found the officer considered relevant to periods 07/19 and 10/19) was received in February 2021. As regards the open-source searches, these were conducted within the period March 2021 to June 2021. While we have not been able to identify the precise date on which the last piece of evidence, sufficient to tip the balance, was received, we are satisfied that this date fell within one year before the assessments were made.

We have carefully considered the submissions and evidence of both parties, but have not found it necessary to refer to every argument and authority that was put to us, nor to describe every part of the evidence.  

Our conclusions on the HMRC officer’s opinion determines the time-limits issue in HMRC’s favour, unless this opinion was perverse or unreasonable. We remind ourselves that the question is not whether HMRC could have made the assessments earlier. Instead we should focus on the reasonableness of the officer’s opinion that the additional evidence was of sufficient weight to justify the making of the assessments that were actually made.

The Appellants submitted that even if we accepted Officer Gutzmore’s evidence regarding her opinion, this opinion was irrational. This was essentially because, in the Appellants’ submission, HMRC held ample evidence on which to make the assessments more than a year before they were in fact made, and the additional evidence received within the one year limit added little or nothing to what HMRC already knew.

Officer Gutzmore was clear in her oral evidence that she drew a distinction between what HMRC knew, and what Mr Nayar knew (or could reasonably have discovered). The evidence held by HMRC about Jeneruhl’s trading partners was only part of what HMRC needed to make the Kittel assessments. In the officer’s view, HMRC also needed to demonstrate that Mr Nayar could, with reasonable diligence, have himself discovered that there were strong indications that these were not legitimate traders.

In our view it was reasonable for Officer Gutzmore to consider that to make the assessments, she first needed to conduct a separate evidence-gathering exercise, distinct from HMRC’s own investigation into the allegedly defaulting traders, with the specific purpose of determining what information would have been available to Mr Nayar. This was directly relevant to the question of whether Jeneruhl knew, or should have known, that its transactions were connected to the fraudulent evasion of VAT.

We also find that Officer Gutzmore did not act irrationally in considering that information about Jeneruhl’s transactions in period 01/20 was needed as evidence of Jeneruhl’s knowledge in 07/19 and 10/19. If Jeneruhl had started trading with legitimate companies in period 01/20, this could have been an indication that it had just been (in the officer’s word) “unfortunate” in its choice of trading partners in the previous periods. We therefore do not consider it unreasonable for her to view Jeneruhl’s trading activities in period 01/20 as being important in deciding whether to make assessments for periods 07/19 and 10/19.

We therefore find that it was not perverse or unreasonable for the officer to rely on the information obtained in February 2021 about Jeneruhl’s transactions in period 01/20, in combination with the results of the open-source searches that were carried out at some point between March 2021 and June 2021, as being of sufficient weight to justify making the assessments. We also find that it was not perverse or unreasonable of her not to have made the assessments before receiving that information.

We would observe that (by contrast to the facts in the Carbondesk case cited above) this was not a case in which there was a long period during which the HMRC officer was inactive, or sat on her hands. Officer Gutzmore contacted Mr Nayar’s representative requesting information just one week after being appointed as the allocated officer in this case, and kept up a steady stream of information requests in the following months. She did not receive all the information she requested, for instance she did not receive the apparently outstanding invoices for period 10/19. The fact that she did not receive these invoices in the year before the assessments were made was therefore not the result of any inactivity on her part.

Mr Watkinson drew our attention to internal HMRC emails exchanged between Officer Gutzmore and her supervisor in July 2021. These emails indicated that at this time, it was HMRC’s view that the assessment for period 07/19 needed to be raised by the end of the month to be within the two-year time limit in VATA 1994, s 73(6)(a). We understood Mr Watkinson’s contention to be that HMRC were not, at that time, seeking to rely on the one-year limit in VATA 1994, s 73(6)(b), because they did not consider they had good grounds for doing so.

Mr Way submitted in response that there is an obvious reason why an HMRC officer would be aware of an upcoming time limit without necessarily at that stage turning their attention to the alternative time limit: to avoid exactly the dispute that is taking place in this case. We agree. It is clear to us that HMRC would prefer to rely on the simple time-based limit in VATA 1994, s 73(6)(a), rather than the evaluative assessment required by VATA 1994, s 73(6)(b), which in the event has required this separate Tribunal hearing. We would also observe that it is for the Tribunal to form its own view as to whether the time limit in VATA 1994, s 73(6)(b) has been met, independent of any view HMRC may have had on this matter.

For the reasons we have given, we determine the preliminary issue in favour of HMRC. The appeal should now be progressed to a substantive hearing.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.