Schedule 11, paragraph 4, VATA, gives HMRC powers to require a non-compliant business to make a security payment as a condition of continuing to make taxable supplies. The affected taxpayer can, under s. 83, VATA, request HMRC to review this decision, explains Graham Elliott.
The delightfully named Half Penny Accountants sought such a review, but the decision to require security was upheld by HMRC. The taxpayer appealed to the tribunal (TC04845).
Its argument was that HMRC did not take into account a relevant fact. This was that the accountancy business was in the process of being sold at the time that the officer carrying out the review of the original decision was considering his decision. The sale of the business, had it been successful, would have generated enough cash to settle all of the VAT debts of the company, and the business would then have been in the hands of new owners. However, with the security demand over their heads, they would be unable to sell the business, as the company would have to cease trading prior to sale. This had the effect, pointlessly, in the taxpayer’s view, of denying it the ability to make amends, which would also be to the disadvantage of HMRC.
The review officer had refused to accept that the intended sale of the business made any difference, since to do so would create inequality with other ongoing businesses. There was little dispute that the original decision to demand security, prior to any knowledge of an impending sale of the business, could be justified by HMRC. The entire argument was over this decision of the reviewing officer to ignore the impending sale.
The tribunal thought this went too...
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