The company in question, Fonecomp, fought the case through the tax tribunal system, and the Court of Appeal, arguing that it should even be reverted to Europe for a decision at the Court of Justice of the EU (CJEU); the company was refused the right to appeal at the Supreme Court.

In a ruling released by Lords Neuberger, Reed and Toulson, at the Supreme Court on 29 May, the case for appeal to Europe was thrown out.

The Supreme Court has refused to grant permission for Fonecomp to appeal saying that its application raises no arguable point of law and that the CJEU's existing case law ‘already provides an answer and the answer is so obvious as to leave no scope for any reasonable doubt’. The legal proceedings are now complete.

The appellant, Fonecomp Ltd, was told to pay the costs for the respondent, Commissioners for HMRC's application and, 'where the respondent applies for costs, the costs to be awarded be assessed'.

Although in its own right, the case involved relatively small sums, centring on a £184,000 VAT fraud, the Supreme Court decision has wider ramifications as it could affect up to 60 outstanding cases, where HMRC is arguing that a carousel-style VAT fraud had been used.

Legal proceedings in the Fonecomp Ltd case finally concluded after the Supreme Court refused the company permission to appeal. This upholds HMRC’s use of an essential tool in fighting this particular type of VAT fraud.

This case involved a type of Missing Trader Intra-Community (MTIC) fraud, which involves a bogus trade between two companies. The first company charges VAT but disappears without paying the VAT to HMRC. The second firm then reclaims the VAT.

MTIC cases are highly complex and often involve multiple trades between numerous companies in different countries, often reaching across all 28 EU member states.

The Fonecomp case involved a type of MTIC fraud known as contra-trading. This involves creating an apparently ‘clean’ chain of transactions to hide the fraud, which is in a connected ‘dirty’ transaction chain.

The company had been involved in trading mobile phones and claimed a VAT refund. HMRC refused on the grounds the company should have known its trading was connected with MTIC fraud.

The Court of Appeal upheld previous rulings that HMRC was correct in using the so-called ‘knowledge test’ in contra-trading cases.

The test refers to a European court ruling that a trader who knew, or should have known, they were taking part in a transaction connected with VAT fraud is regarded as a participant and cannot reclaim its VAT.

In this long-running case, Fonecomp unsuccessfully appealed to the First Tier Tribunal, Upper Tribunal and Court of Appeal.

At the Court of Appeal, the judge Lady Justice Arden ruled that: ‘Furthermore, in my judgment, it is not appropriate in this case to make a reference for a preliminary ruling to the CJEU.

‘ The CJEU has made it clear that national courts should not permit the provisions of the VAT scheme to be used for abusive or fraudulent ends.

‘Fonecomp was found to be a participant in a fraud. In my judgment, insofar as the grounds of appeal related to matters of EU law, the answers were acte clair.’

The Fonecomp case involved a relatively small sum – about £184,000 – but around 60 cases involving up to £260m in VAT rest on this case.

Since 2010 HMRC has secured 124 criminal convictions for MTIC fraud with sentences totalling more than 450 years.

The original Court of Appeal decision in Fonecomp Limited v The Commissioners for Her Majesty's Revenue and Customs [2015] EWCA Civ 39 Case No: A3/2014/0293 dated 3 February 2015 is available here