Tribunal rules HMRC not unreasonable

HMRC did not act unreasonably by withdrawing from a VAT dispute with a businessman, even though the investigating officer was unable to produce evidence for his claims, a tribunal has ruled. 

Shahjahan Tarafdar, the owner of a takeaway-restaurant, had his appeal for costs dismissed by the first tier tribunal (FTT) subsequently appealed to the upper tier tribunal (UTT).

In the case, Shahjahan Tarafadar v HMRC [2014] UKUT 0362 (TCC), the UTT found that the FTT did not use the “correct approach” to decide an appeal for costs.

But, it added, even if it had used the right approach it would not have changed the verdict. Therefore, it did not overturn the earlier ruling.

The UTT said that HMRC could not have been reasonable to have anticipated that the case would hinge on the “honesty or genuineness” of its officer’s approach being called into question, or that he would be called to give oral evidence at the tribunal.

“ … The earliest time at which it was reasonable for HMRC to withdraw was when they actually withdrew,” judges Roger Berner and Judith Powell said.