GB-Gadgets Ltd v The Commissioners for HMRC
[2023] UKFTT 726 (TC)
Treasures of Brazil Limited v The Commissioners for HMRC
17 October 2024
[2024] UKFTT 929 (TC)
First-tier Tribunal
A company was told by HMRC not to charge VAT until their registration was confirmed. They didn't, but HMRC later said they owed VAT. The court agreed with the company, saying HMRC's instructions created a promise they couldn't break. Because HMRC’s communication was unclear and caused significant delay, the company did not have to pay.
Key Facts
- •Treasures of Brazil Ltd applied for voluntary VAT registration on 21 September 2022, requesting an effective start date of 1 October 2022.
- •HMRC's email response advised waiting for confirmation before charging VAT.
- •HMRC's confirmation letter was issued on 17 December 2022 but received by the Appellant on 28 December 2022.
- •The Appellant didn't charge VAT in the period 12/22 but claimed input VAT.
- •HMRC issued a section 73 VATA assessment for £6,512.02.
- •The Appellant appealed, arguing legitimate expectation based on HMRC's email advice.
Legal Principles
Jurisdiction of the Tribunal to consider legitimate expectation in appeals under s 83(1)(p) VATA.
KSM Henryk Zeman SP z oo v HMRC [2021] UKUT 182 (TCC)
Principles for determining legitimate expectation: (1) Taxpayer must disclose all relevant information; (2) HMRC's statement must be clear, unambiguous, and unqualified; and (3) HMRC's conduct must be conspicuously or outrageously unfair.
R v Inland Revenue Commissioners, ex parte MFK Underwriting Agencies Limited [1990] 1 WLR 1545; R v Inland Revenue Commissioners ex parte Unilever Plc [1996] STC 681
Balancing fairness with the public interest in tax collection; high threshold for unfairness to displace presumption of HMRC's right to collect tax.
HMRC v Hely Hutchinson [2017] EWCA Civ 1075; Samarkand Film Partnership No 3 v HMRC [2017] STC 926; Finucane [2019] UKSC 7; R v Northern East Devon Health Authority, ex parte Coughlan [2001] QB 213
The unique nature of VAT where the trader is generally regarded as merely collecting tax to be economically borne by others.
Totel v Revenue and Customs Commissioners [2018] UKSC 44
Voluntary VAT registration under paragraph 9 of Schedule 1 of VATA.
VATA, Schedule 1, paragraph 9
HMRC's assessment power under s 73 VATA.
VATA, s 73
Right of appeal under s 83 VATA.
VATA, s 83
Outcomes
Appeal allowed; assessment set aside.
The Tribunal found the Appellant had a legitimate expectation, based on HMRC's clear instruction not to charge VAT, that it was not required to collect VAT pending registration. This expectation, coupled with the significantly delayed processing time by HMRC, rendered the assessment conspicuously unfair.