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HMRC procedural errors

24th May 2017
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Procedural errors by HMRC rendered assessments ‘null and void.’ There was around £110,000 assessed in total against a limited company, and a Director of the company. See [2014] UKFTT 301 for the First Tier decision, and the calculation of the assessments.

Although not a VAT case, this decision may subsequently be found to apply to VAT and other taxes. If so, it provides a helpful precedent.

The substantive issue was the non-submission and non-payment of Tax Returns for a number of years, by both the company and the Director. HMRC alleged ‘deliberate behaviour’ on the part of the taxpayers.

The Upper Tier Appeal concerned the question of the underlying validity of the assessments, which was not considered by the FTT. HMRC’s failure, at FTT, to demonstrate the validity of the assessments ultimately rendered those assessments invalid.

This is a striking conclusion. I would not be surprised if HMRC will Appeal the decision.

HMRC had argued that, if the Appellant wished to challenge the validity of the assessments, then it must do so when it first appealed. The UT held that since the burden of proof lies with HMRC, it must demonstrate that the assessments are valid, and not wait for the taxpayer to challenge this. The FTT erred in law by assuming that this issue did not need to be explicitly raised by the Appellant.

There is a wider point too. In all cases, HMRC must raise assessments properly. A taxpayer must feel free to challenge both the substance of an assessment, and its validity. But it is not enough just to say; ‘I disagree!’

The Upper Tier decision is here: http://www.bailii.org/uk/cases/UKUT/TCC/2015/578.html

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