Revenue and Customs Commissioners v Brayfal Ltd, [2011] All ER (D) 139 (Mar)
It was well established that a taxable person who knew or should have known that the transaction which he was undertaking was connected with fraudulent evasion of VAT was to be regarded as a participant and failed to meet the objective criteria which determined the scope of the right to deduct.
If a taxpayer had the means at his disposal of knowing that by his purchase he was participating in a transaction connected with fraudulent evasion of VAT he lost his right to deduct, not as a penalty for negligence, but because the objective criteria for the scope of that right were not met. The principle did not extend to circumstances in which a taxable person should have known that by his purchase it had been more likely than not that his transaction had been connected with fraudulent evasion. The test was simple and should not be over-refined.
