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HMRC dodges bar in BPP VAT dispute

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20th Jan 2015
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HMRC won an appeal against a barring order in a VAT dispute with professional training company BPP over the supply of education books, but was criticised by the upper tier tribunal for failing to provide enough evidence for its case. 

BPP will be known to many accountants, who may have trained for their exams using its courses and books. Some of BPP’s publications are exempt from VAT; but the educator is in dispute with HMRC on the treatment for other materials used on its courses.

Until 2006 BPP accepted that its education books and other materials were VAT-able.

In 2006 BPP changed its structure and created two companies, supplying different education books. It argued that they were zero rated. HMRC disagreed.

The VAT law on separate supplies changed in 2011. In 2012, HMRC sent BPP a VAT bill for the book supplies.

The case went to the first-tier tribunal and HMRC was asked to show its “statement of case” in October 2013. BPP claimed that HMRC’s evidence for its case wasn’t clear enough.

Both parties agreed that HMRC should provide further information by 31 January 31, ahead of a hearing scheduled for later that year.

HMRC was warned that the tribunal may strike out all or part of the proceedings if HMRC failed to provide the required information in time.

On 31 January 2014, HMRC served a document, which, it said, met the terms of the direction.

BPP disagreed, and in March applied to get a barring order on HMRC.

The following month, HMRC said it was withdrawing its two VAT assessments, because of a decision in a similar case, but stuck by its 2012 VAT demand.

In June, a judge granted BPP’s request for a barring order, which HMRC challenged - leading to a UTT hearing on 14 October.

HMRC accepted that the evidence it had given in October 2013 and January 2014 was “insufficient”.

The upper tribunal said the barring order should not be implemented even though it criticised HMRC’s conduct.

BPP had incurred expenses in getting information for the tax case and had “suffered a significant, unnecessary and unwarranted delay,” judge Colin Bishopp of the upper tribunal said in a judgement published in October last year.

“I find much which is unsatisfactory in HMRC’s conduct in this appeal, and little to explain, still less to justify, that conduct... There has been little, and in most respects no explanation of the failure by HMRC to do what was required of them. It follows that HMRC attract little sympathy,” he said.

But if the barring order was granted it might “hand an unwarranted windfall” to the taxpayers, and there would be no adequate determination of whether the companies’ supplies should be zero rated, the judge said.

He allowed HMRC’s appeal against the barring order, and will consider the possibility of awarding indemnity costs after reviewing further documents from both parties. An award against HMRC is by the first tier tribunal would be feasible as a way to mark its disapproval of the department's conduct, but the judge also noted that while "the prejudice to BPP of HMRC’s conduct "is not great, but it is real." So BPP is unlikely to receive the indemnity costs it seeks.

A spokesman for HMRC said that BPP had appealed against the upper tribunal's decision.  Their appeal will be heard in the Court of Appeal.

BPP was unavailable for comment.

Replies (3)

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By johnjenkins
21st Jan 2015 12:59

I sincerely hope

that BPP win on the grounds that HMRC think they can treat the tribunal with contempt and get away with it.

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By Mikolaj
21st Jan 2015 17:53

BPP

HMRC ineptitude and incompetence is boundless.

 

I am on the side of BPP, both practically and morally; as regardless, education books whether academic or professional should be zero rated. The fact that HMRC claim otherwise flies in the face of logic, although HMRC could never be accused of being logical, now that's a fact!

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By AndrewV12
28th Jan 2015 13:37

HMRC mmmm

 

Two things spring to the mind.

Extract above

In 2006 BPP changed its structure and created two companies, supplying different education books. It argued that they were zero rated. HMRC disagreed.

 

Dont BPP read their textbooks everyone knows Separating a business is the oldest trick in the book.

 

And just how poor are HMRC, how many cases can an organisation lose and still plod on. 

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