VATF43235 | Basic interventions: output tax interventions: refusing zero rating of dispatches and exports where there is connection with fraud: Mecsek principle: what if a tax fraud has been committed by someone further down the supply chain from the customer?

The Mecsek judgement only provides specific authority to challenge cases in which fraud has been committed by the customer. However, the judgement also reiterates that the prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged under the Principal VAT Directive. Therefore if you come across a case in which fraud has been committed at a stage further along the transaction chain and where the taxable person ‘knew or should have known’, e.g. if the taxable person’s customer is a ‘conduit’ (VATF36300) who immediately re-dispatches the goods to another Member State in which the fraud arises, you should contact the VAT Fraud Team to discuss what action may be appropriate.