An HMRC barrister has told a tax tribunal that Aria PC’s managing director “must have known” that 11 disputed deals his company made a decade ago have a “connection to fraud”.
Reseller Aria PC, has been accused by HM Revenue and Customs, of playing a key part in a missing trader intra-community fraud (MTIC fraud). In 2006 the company struck a deal to sell Intel Computer Processors and TFT monitors and reclaim the VAT on them from HMRC. Eleven of those deals were traced by the taxman to a tax loss.
HMRC are alleging that Aria PC (or ATL as they registered) knew these deals were part of a fraudulent scheme. In 2016, specialist tax court, Tax and Chancery Chamber of the First-Tier Tribunal (FTT) ruled against Aria PC. They found that ATL’s managing director, Aria Taheri “knew or ought to have known” about the fraud because he oversaw each of the deals. These series of sales ended up depriving HMRC of over £758,000.
Aria PC used MSN Messenger to advertise its wares to its trade contacts, using a spreadsheet to collate offers and work out a suitable markup. In two of the deals, the goods were released “without payment having been received” to which Frank Harasiwka, ATL’s finance man, could provide no explanation. It was also claimed that Taheri “was unaware that goods had been released to the customer prior to receiving full payment”.
The taxman initially ruled that Aria PC needed to produce an extra £313,000 to cover the company’s own VAT bill, with the Tribunal upholding that. ATL appealed against the lower tier Tribunal’s decision and a three-day hearing took place last week in the Upper Tribunal.
Barrister for HMRC, Janes Puzey, told the tribunal “In period 07/06 the Appellant entered 11 wholesale transactions which lifted its quarterly turnover to the unprecedented level of £9.9m, £2m higher than the previous highest figure,” in his written submissions. He went on to further state “Those 11 wholesale deals accounted for 50 percent of its turnover in 07/06 and 25 percent of its profit.”
Evidence given during the appeal stated the deals were said to have been negotiated by Harasiwka and Eddie McFadden, ATL’s purchasing manager. In his closing speech to Mr. Justice Roth and Tribunal Judge Richards, Puzey accepted that Taheri “had little or no involvement in the deals”. He did, however, question why Harasiwka and McFadden “gave the impression of knowing little about the details of the deals while claiming responsibility for them”.
Both sides provided conflicting arguments, Mr. Justice Roth commented on the final day “As regards the customers, it is the sort of trading where one can fairly say and infer you expect negotiation… someone got involved in the details. And Mr. Taheri said it was Mr. McFadden and the tribunal is saying here that Mr. McFadden gave the impression in his evidence that he didn’t know much about the detail”.
Mr. Justice Roth also said, “We will obviously take some time to consider our decision.” Judgments in Upper Tribunal cases usually take months to be published.