Save content
Have you found this content useful? Use the button above to save it to your profile.

HMRC advice & reasonable excuse

15th Feb 2020
Save content
Have you found this content useful? Use the button above to save it to your profile.

The Upper Tier Tribunal has found in favour of Marlow Rowing Club. The Club had argued that it had a reasonable excuse for its issue of a zero-rating certificate in relation to the construction of a new clubhouse.

The construction of a new building for a relevant charitable purpose (RCP) is zero-rated. The recipient charity is required to provide a certificate to the contractor before construction commences.

In this case, HMRC ruled that the RCP test was not met so the supply could not be zero-rated. This rendered the Club, being the recipient of the supply and the issuer of the certificate liable to a penalty under s62. The penalty is equal to the amount of VAT which it should have been charged. In this case, around £280,000.

The Upper Tier decision is closely argued and well worth a read. Amongst other things it highlights the unreasonable burden placed upon taxpayers by HMRC.

HMRC’s argument was essentially; ‘if you had written to use, we would have given you a ruling. In the event that the ruling is incorrect, you are protected from a penalty.’

The difficulty is this: had the Club sought a ruling BEFORE issuing a certificate, that ruling is not appealable, since the supply had not been made. Had the Club sought a ruling AFTER construction, that ruling could not affect the reasonable-ness of the issue of the certificate. This second ground of appeal (para 44) proved to be the successful argument.

Add into the mix advice from the Club’s Accountants, Baker Tilly, a Counsel Opinion, and the appeal of Longridge-on-the Thames, a near neighbour, incidentally, of Marlow Rowing Club. (Longridge had started its journey through the Tribunals and Courts, but the litigation was not been finalised.)  The Upper Tier decision (paras 52-60) works through the dilemma facing the Club, which ultimately meant the appeal was successful.

I noted that the decision is consistent with the Upper Tier decision in Greenisland Football Club [2018] UKUT 440.

The Upper Tier decision in Marlow Rowing Club is here:

http://www.bailii.org/uk/cases/UKUT/TCC/2020/20.html

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.