Impact Contracting Solutions Limited v HMRC Court of Appeal decision on Ablessio point

The decision in the case of Impact Contracting Solutions Limited (“Impact”) versus HMRC in regard to the Ablessio point has now been published.

The case which was heard on 1st May 2025, examined the question of whether, when a taxpayer’s VAT registration is cancelled on the Ablessio point because of fraud by another entity in the supply chain, the taxpayer should still be entitled to be registered for VAT in respect of their transactions on separate untainted supplies.  The appeal follows decisions in the First Tier Tax Tribunal ([2022] UKFTT 47 (TC)) and the Upper Tribunal ([2023] UKUT 00215 (TCC)).

The case was relevant only to the principles of the law and there was no representation of the particular circumstances of Impact. 

The decision

The 3 judges presiding over the case concluded that the VAT registration of a taxpayer can be cancelled in circumstances where they are engaged in a fraudulent supply chain, even if they are not the defaulting party, provided that they knew or should have known of the existence of the fraudulent transactions.  The fact that the taxpayer may have other transactions which are not connected to fraud does not alter this decision.    

The correct approach is to apply the knowledge test which is used in Kittel (for denial of input tax claims), together with consideration of whether deregistration is a proportionate step. 

On this basis, even if the taxable person is not the defaulter, they lose their right to be registered for VAT where their transactions are shown to be connected to fraudulent evasion which they knew or should have known about.  If that is the case, they are using their own VAT registration fraudulently. 

The decision must be proportionate in that it cannot be based on mere suspicion.  There must be objective evidence to support the accusation that the VAT registration will be used fraudulently.

Read the full case here.