The tribunal's view
The First-tier Tribunal dismissed One Call Consultants Ltd's VAT appeal on 16 December 2025, upholding HMRC's denial of £314,401 in input tax and £115,032 in penalties. Director Lewis McGrail also lost his personal liability appeal under s69D VATA 1994.
The case centred on payroll services supplied by four companies between May 2019 and February 2020: Building Office Management Ltd, Dry Build Solutions Ltd, Powell Management & Consultancy Services Ltd, and Ryfix Installations Ltd. HMRC argued these suppliers were part of a fraudulent VAT supply chain.
What actually happened
McGrail, a former electrician, founded the recruitment agency in 2016 after poor experiences with recruiters. He operated with a mentor for the first year before becoming sole director.
HMRC opened enquiries into OCC's repayment claims in 2017, then launched a supply chain investigation in 2020. In February 2021, HMRC issued the input tax denial notice. By June 2021, McGrail faced a personal penalty notice for £88,640, with additional penalties totalling £26,391 issued in early 2023.
The tribunal found McGrail's due diligence reactive rather than preventive. Under the Kittel principle (CJEU C-439/04), taxpayers lose the right to input tax recovery if they knew or should have known their transactions connected to fraud. The FTT concluded McGrail should have known.
Why this matters
HMRC deregistered OCC from VAT on 21 October 2020 for using its registration number to facilitate fraud. The tribunal rejected the company's mitigation pleas as untimely and prejudicial to HMRC.
Personal liability provisions under s69D extend responsibility beyond the company to directors. CFOs and finance teams should note: supplier due diligence needs to be documented and proactive. Post-1 January 2023, HMRC no longer pays commercial restitution interest on repayments, making prevention more critical than correction.
The 56-day window to appeal to the Upper Tribunal has likely passed with no appeal noted. One Call's approach, whatever its intent, wasn't enough.