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Sometimes you have to stand your ground!

23rd Mar 2021
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I have found that HMRC are quick to issue VAT assessments, often on shaky ground. The problem then is that the initiative shifts to the taxpayer to displace the assessment, which will come with interest and maybe penalties also.

It is time consuming and can be expensive and stressful to challenge HMRC. I have spoken to many in business who have simply chosen not to do so. (As an aside, it is also very difficult to secure any recompense from HMRC of those costs, either directly or via the Tribunal.)

I think the case of GLS Limited was just such a case. The company had received £282,000 as a loan from a connected party. The connected party was a finance company. HMRC assessed GLS for VAT on the payments, as consideration for taxable supplies. GLS provided copies of relevant loan agreements, but the HMRC Officer rejected them as ‘insufficient evidence.’ The Tribunal stated that this was an incorrect judgment by the Officer.

It seems to me that the Officer was simply looking for the highest revenue outcome and therefore chose to reject evidence which pointed away from that conclusion.

 

There is another interesting detail in the decision. HMRC can only raise a VAT assessment if a Return is “incorrect or incomplete” (s73(1)). HMRC had argued that the Returns were incomplete because the payments were excluded from the Return. (Loan payments and repayments have to be excluded from Boxes 6 and 7.)

Since the Tribunal had held that the payments were in respect of loans, they did not need to be included on the Return, the Returns were therefore complete. No assessment could arise.

www.bailii.org/uk/cases/UKFTT/TC/2020/TC07985.html 

Replies (3)

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By Paul Crowley
23rd Mar 2021 17:14

Is there no internal review procedure at HMRC?

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Replying to Paul Crowley:
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By Brend201
26th Mar 2021 11:47

Paul Crowley wrote:

Is there no internal review procedure at HMRC?

Apparently there was: "Mr Symon’s view was upheld by the Review Officer."

But see my other reply!

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By Brend201
26th Mar 2021 11:45

The judge went close to calling the HMRC officer a liar:

"Miss Marshall produced the following documents to the Tribunal that she said she had shown to Mr Symon during the site visit but which Mr Symon had said were not sufficient evidence of the nature of the payments."

"In evidence Mr Symon said he had no recollection of being shown these documents."

"I consider Miss Marshall’s version of events to be more than likely to have occurred because the meta data of the Documents shows they were created in 2016 just before the making of the payments and Miss Marshall had said during the site visit that they were loans."

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