A recent run of Upper Tribunal tax decisions is a useful reminder for business owners: HMRC disputes are no longer just about whether the company has a paperwork problem. In serious VAT cases, the conduct, knowledge and evidence trail of directors can come under the spotlight too.
GOV.UK's Tax and Chancery tribunal decision feed shows several Upper Tribunal tax decisions released in early July 2026, including decisions released on 1, 2, 6, 7 and 8 July. One published decision involving Ashley Charles Trees v HMRC concerned VAT penalties, a director's liability notice, sections 60 and 61 of the VAT Act 1994, and the Kittel test used in VAT fraud-linked supply chain cases.
The commercial lesson is wider than one case. Where HMRC argues that transactions were connected with fraudulent VAT evasion, the question can become whether the business, through the people controlling it, knew or should have known about that connection.
For SMEs, especially those buying and selling through chains of suppliers, subcontractors, labour providers, stock vendors, wholesalers or intermediaries, that is not an academic legal point. It is an evidence problem.
Why it matters
Most legitimate businesses do not set out to be involved in tax fraud. The practical risk is weaker: a supplier is accepted without enough checking, a deal looks too good to question, paperwork is incomplete, payments move through unusual routes, or no one keeps a proper record of why the business believed the transaction was genuine.
That matters because VAT supply-chain cases often turn on what the business knew, what it should have known, and what checks were reasonable in the circumstances.
If a company cannot show who approved the supplier, what checks were carried out, how pricing was assessed, why the trading pattern made sense, and how delivery or service evidence was verified, it is exposed. The director may know the business was honest, but HMRC and a tribunal will look for records, decisions and contemporaneous evidence.
In plain English: being clean is stronger when the paperwork proves it.
VAT risk can hit cashflow fast. Disallowed input tax, penalties, interest and director-level exposure can turn a trading issue into a survival issue.
The human consequence is just as real. Directors can find themselves defending not only the company's tax position, but also their own decision-making. Employees, customers and suppliers may never see the legal argument, but they feel the damage when cash is tied up, margins are squeezed, credit tightens, or confidence in the business drops.
This is especially relevant for construction, labour-heavy businesses, wholesale trade, fast-moving supply chains and firms using multiple intermediaries. Those sectors often operate under time pressure, with changing suppliers and tight margins. That is exactly when weak onboarding and poor record keeping become expensive.
Practical take away
Businesses should treat supplier and subcontractor checks as a live commercial control, not a once-a-year admin task.
Before relying on a supplier, keep evidence of:
company identity;
VAT registration;
trading address;
director or contact checks;
insurance where relevant;
contract terms;
bank details;
pricing rationale;
delivery records, timesheets or job evidence;
who approved the relationship internally.
Where a price is unusually low, a supplier is new, payment terms are strange, documentation is thin, or the chain is unclear, the business should pause and record why it is comfortable proceeding. If it is not comfortable, walk away.
The goal is not bureaucracy for its own sake. It is making sure the business can prove it acted carefully and denmonstrated 'Reasonable Care' if HMRC ever asks.
If you are unsure whether your supplier checks, VAT records or subcontractor evidence would stand up to HMRC scrutiny, speak to one of the Genius team. Call 020 7700 2000 or email hello@geniusmoney.co.uk and we can talk you through the practical checks.
Conclusion
The latest tax tribunal feed is another warning that compliance risk is moving beyond forms and filings.
For directors, the real defence is not a memory of doing the right thing. It is a clear evidence trail showing that the business checked who it traded with, understood the transaction, kept control of the paperwork and acted with reasonable care.
Clean records do not just help with VAT. They protect the people running the business.
Sources
GOV.UK: Tax and Chancery tribunal decisions: https://www.gov.uk/tax-and-chancery-tribunal-decisions
GOV.UK: VAT guide: https://www.gov.uk/guidance/vat-guide-notice-700
GOV.UK: Check if a VAT number is valid: https://www.gov.uk/check-uk-vat-number
