In HMRC v Infinity Distribution3 , the Court of Appeal has held that evidence purporting to establish that alleged supplies had not actually taken place was admissible, even in the absence of an allegation of fraud by HMRC.


This case related to an appeal of a case management decision by the UT refusing to allow HMRC to deploy evidence in two conjoined appeals in respect of HMRC’s refusal to repay input VAT claimed by Infinity or permit Infinity to zero-rate its supplies.

The first appeal group related to HMRC’s decision to deny Infinity input VAT paid by it in relation to taxable supplies of mobile telephones on the grounds that the VAT invoices did not comply with regulation 14(1)(g) or (h) of the Value Added Tax Regulations 1995, which require that VAT invoices include a sufficient description to identify the goods and the quantity (the invalid Invoices Appeals).

The second appeal group related to the refusal of HMRC to allow Infinity to zero rate its own supplies of mobile telephones, on the basis the export did not take place (the Zero Rated Appeals). HMRC’s case was that the Convention relative au contrat de transport international de Marchandises par route (CMRs) submitted were unreliable because they derived from a notoriously fraudulent freight forwarding company called Magic Transport, who had a track record of falsifying CMRs and export evidence documents.

HMRC had confirmed on numerous occasions that they were not advancing a positive case of fraud, participation or knowledge of fraud, bad faith or failure to take reasonable steps, against Infinity

In relation to the Invalid Invoices Appeals, HMRC served witness evidence (the Wafer statement) which sought to prove criminal convictions of various named individuals for conspiracy and cheating the public revenue in connection with the supply of mobile telephones, some of whom had connections with Infinity’s suppliers.

In relation to both the Invalid Invoices and Zero Rated Appeals, HMRC served a witness statement (the Holden statement) which amongst other things, made allegations of dishonesty against Infinity and others in the supply chain and, in particular, set out a detailed evidential case seeking to prove that the Magic Transport CMR’s could not be relied upon (Magic Transport evidence).

Infinity challenged the admission of the whole of the Wafer statement and parts of the Holden statement on the ground that, since HMRC were advancing no positive case of fraud, it was both irrelevant to the issues in the appeal and unfairly prejudicial.

Both the FTT and the UT agreed with Infinity that the whole of the Wafer statement and parts of the Holden statement (including the Magic Transport evidence) should be struck out.

HMRC appealed to the Court of Appeal.

Court of Appeal’s judgment

The Court found that the Wafer statement was “manifestly irrelevant” to the issues in the appeal. The statement sought to prove certain convictions of fraud without any connection with the transactions at issue in Infinity’s case and did not advance HMRC’s case that mobile telephones of the types identified in the relevant invoices could not have been available in the market in sufficient quantities for there to have been genuine supplies to which the invoices related. Accordingly, this part of the appeal was dismissed.

In relation to the Holden statement, at the hearing HMRC accepted that those parts of the statement relating to allegations of fraud against Infinity were no longer relied upon. The Court was heavily critical of HMRC’s inclusion of this evidence which was contrary to the case they were advancing. In relation to the Magic Transport evidence, the Court considered it was evidence challenging the reliability of the CMR’s. The Court noted that it did not, on its own, contain any allegation of participation in or knowledge of fraud, bad faith or failure to take reasonable steps by Infinity. The Court therefore rejected the argument that HMRC was also trying to prove a case of misconduct by Infinity.


This case serves as a useful reminder that parties preparing evidence in litigation must ensure that the evidence relates to the pleaded case and is relevant to the issues before the Tribunal. In civil litigation, the same evidence may serve more than one purpose. In this case, the Magic Transport evidence was supportive of a positive case that no real reliance could be placed on the CMRs as evidence of export. The fact that it might also constitute the first plank in a positive case of misconduct against Infinity, which had not been pleaded, was irrelevant.

A copy of the decision can be found here.