It is unacceptable that HMRC are failing to manage VAT properly. I see far too many cases when they are rightly criticised.
The latest is the FTT decision in Sussex Cars Association. By the time of the Hearing, the case had already been running for nearly 4 years, with £1.4m at stake. The exact reason for the assessment was not stated, as the Hearing was an application for costs, not substantive.
There are a number of issues mentioned in the short 12-page decision. But in my view the most significant underlying argument was that the taxpayer intended to bring an argument that HMRC would have been ‘unjustly enriched’ were the Appeal to fail. HMRC decided that they no longer wished to defend the Appeal, and to withdraw the assessments. This argument cannot therefore be argued properly in Court.
Another factor was that the taxpayer was bringing a Judicial Review claim, claiming legislative expectation, based on statements of VAT Officers in earlier visits. Again, it seems this claim will not be heard on Court.
HMRC brought no Officer to give witness evidence during the Hearing, nor where there any witness statements, so no explanation of why certain decisions were made.
The Tribunal criticised HMRC’s presenting Officer; “I find Mr Goulder’s attempts at interpreting the clear words in the three letters at best to be forced, but more likely, a disingenuous attempt to undermine the importance of the section 33/unjust enrichment argument in HMRC’s decision to withdraw.”
HMRC were criticised for allowing the case to run for so long before withdrawing their assessments. No new facts were presented during that period. The Tribunal held that it was unreasonable for HMRC to act in this way.
And, during the ADR process, HMRC sent the wrong representatives to the meeting, so no one present was able to enter into the technical subject matter at the heart of the case. And, having concluded the ADR process, HMRC failed to comply with the ‘exit agreement.’
Not surprisingly, the Tribunal awarded costs against HMRC.
Read the case here (and you will probably find more grounds for complaint): http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10079
Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire
I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.