The appellant, a cash and carry business trading as Elbrook Limited, appealed against two assessments made by HMRC to deny the deduction of VAT input tax totalling £1,273,739.55.

HMRC issued the assessments in respect of 335 transactions to purchase soft drinks in the VAT periods ending 04/12 to 07/14 on the ground that the purchases were connected with the fraudulent evasion of VAT.

It also determined that the appellant either knew or should have known this. Thus, HMRC disallowed input tax totalling over £1.2m.

Elbrook accepted that 331 of the transactions were connected to fraud but maintained that four transactions related to a supply which was not connected.