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image of nottingham forest football ground | accountingweb | HMRC 3 – 0 Nottingham Forest in VAT late assessment appeal
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HMRC scores hat-trick in VAT late assessment case

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It was HMRC 3, Nottingham Forest nil when the football club failed to be match-fit for its appeal to the upper tribunal in this VAT case.

6th Jun 2024
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In Nottingham Forest Football Club Ltd vs HMRC [2024] UKUT 00145 (TC), HMRC was the winner as each of the football club’s three grounds of appeal were dismissed. 

On 29 April 2019, HMRC raised an assessment for £345,561 of VAT in relation to the club’s August 2015 VAT return period. The taxpayer argued at the first tier tribunal (FTT) that the assessment was out of time because it had been made more than one year after evidence of sufficient facts to justify making an assessment had come to HMRC’s knowledge (per s 73(6)(b) of the VAT Act 1994).

Own goal

The FTT held that the burden of proving that the assessment was out of time lay with the taxpayer. The taxpayer had not provided evidence explaining when it had provided HMRC with each piece of information during the enquiry. The FTT was therefore unable to ascertain what information the taxpayer had provided HMRC with as of 29 April 2018. 

The FTT concluded that the taxpayer had not proved that HMRC had all the information it needed on that date. It found on balance that the likely earliest date on which HMRC had the necessary information was 9 May 2018, meaning that HMRC had raised the assessment within the one-year time limit. The FTT dismissed the taxpayer’s appeal.

A game of two halves

The taxpayer kicked off its appeal to the upper tribunal (UT) by arguing that the FTT had made a mistake in its decision by not expressly identifying which facts had justified HMRC making an assessment or when the last evidence of those facts was communicated by the taxpayer to HMRC. The taxpayer argued that the FTT was required to make these findings by the decision of the High Court in Pegasus Birds Ltd vs C&E Commrs [1999] STC 95 and had made an error of law because it had not done so.

The taxpayer couldn’t get this argument across the line. The UT was willing to assume that the FTT had considered the relevant principles properly because it had rehearsed the law (including Pegasus Birds) correctly in its judgment. It held that the FTT had not expressly referred to what material was in HMRC’s possession or when because the taxpayer had not provided sufficient evidence enabling it to do so. 

Moving the goalposts

The taxpayer then argued that HMRC should have to prove that it did not have the necessary information one year before the assessment was raised. The taxpayer argued that the FTT had been wrong in treating Pegasus Birds as authority that it bore the burden of proof (even though it had not argued against this at the FTT) because the parties in Pegasus Birds had agreed that the taxpayer would prove its case – the High Court had not needed to consider the point.

The UT accepted that Pegasus Birds was not binding on it but nevertheless considered it was correct as a matter of principle that the taxpayer should bear the burden of proof. It also accepted HMRC’s argument that a different case, Lithuanian Beer vs HMRC [2018] EWCA Civ 1406, about materially similar wording on assessment timeframes in the excise duty legislation, was authority that the taxpayer bore the burden of proof, even if Pegasus Birds was not. 

The taxpayer then argued that it had established a prima facie case, which HMRC should be required to rebut. The UT didn’t accept this. It held that the taxpayer hadn’t provided enough evidence to establish any presumption in its favour that HMRC had the necessary information one year before the assessment was raised.

HMRC wins three points

The UT had no difficulty dismissing the taxpayer’s third argument that the FTT had no basis for making the finding of fact that HMRC had all the information it needed by 9 May 2018. 

The UT held that the FTT’s decision disclosed no positive finding of fact on the issue. The FTT had found it impossible to identify from the evidence the precise date on which HMRC had held the appropriate documentation. Again, this was because the taxpayer hadn’t given sufficient evidence of which information it had provided to HMRC before the all-important date of 29 April 2018.

A funny old appeal at the end of the day

The UT noted at multiple points in its decision that many of the taxpayer’s problems in the appeals were caused by its failure to provide evidence of which information it had provided HMRC with during the enquiry and when it had done so. So, while there are no easy fixtures at the FTT and UT, perhaps the taxpayer could have done more to ensure that its case was match-fit on the day.

Replies (5)

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By Open all hours
06th Jun 2024 13:51

Almost 9 years to sort out a VAT return. Too far into Fergie time.

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Replying to Open all hours:
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By FactChecker
06th Jun 2024 22:24

If they keep going back and back, they'll have to deal with Cloughie!

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Replying to FactChecker:
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By D V Fields
07th Jun 2024 20:01

With Cloughie we have one of his quotes....

“We talk about it for twenty minutes and then we decide I was right.”

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By Springfield
07th Jun 2024 11:23

In case anyone is wondering - the underlying case concerns is a VAT liability arising from 2015 when some significant discrepancies appear to have arisen when Forest changed their accounting system from Sage to Microsoft Navision, which according to HMRC's analysis resulted in errors to both the input and output tax in the relevant VAT return.

And so the lesson to be learned here is to be very cautious about the errors that can arise when a new accounting system is introduced. Or, alternatively, if there are errors in your favour, hope that HMRC is timed out if it subsequently finds out. In this case HMRC did conclude that no penalties were due as the errors were genuine and innocent, which seems quite decent of them.

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By Paul Crowley
07th Jun 2024 11:46

The club did not get its VAT right, and was looking to evade the tax.
What a bunch of prats.

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