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HMRC internal manual

VAT Fraud

Basic interventions: output tax interventions: refusing zero rating of dispatches and exports where there is connection with fraud: the Mecsek principle: the Mecsek principle in more detail

The ECJ’s conclusion can be broken down into two parts.

Zero rating can be denied for an intra-Community supply where:

  • the taxable person has failed to fulfil his obligations as regards evidence, or
  • the taxable person knew or should have known that his transaction was part of a tax fraud committed by the customer, and that he had not taken every reasonable step within his power to prevent his own participation in that fraud.

Starting with the first bullet point, the conditions for zero rating an intra-Community supply can be found in VEXP70000.

For the purposes of this guidance the second bullet point is called ‘the Mecsek principle’ and is discussed in further detail in VATF43233.