Misdirection by HMRC
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1st August 2013
A recent judgement of the High Court in the case of R (on the
application of GSTS Pathology LLP and others) v HMRC has highlighted
the circumstances in which a taxpayer can rely on a ruling provided by
HMRC in relation to the VAT treatment of a particular transaction. The
Court ruled that a taxpayer has a “legitimate expectation” to be taxed
with reference to a particular ruling, until such time as an
alternative ruling is issued, as long as both of the following
conditions are met:
(i) the taxpayer has provided HMRC with full details of the
transaction upon which a ruling from HMRC was sought, and;
(ii) the ruling or statement relied upon must be clear,
unambiguous and devoid of relevant qualification.
In the particular circumstances of this case HMRC issued clear
rulings in 2008 and 2010 that the pathology services provided by the
relevant entity attracted VAT at the standard rate. In January 2013
HMRC issued a contradictory ruling that the pathology services
performed by the business were exempt from VAT, and the taxpayer
submitted an appeal to the First Tier Tax Tribunal.
Following a judicial review the High Court ruled that the
taxpayer had a legitimate expectation that its services would attract
VAT in light of the earlier rulings and thus it was wholly unreasonable
to expect the business to restructure its VAT treatment such time as
the true legal position had been established. As a result, the Court
granted an injunction confirming that the taxpayer should continue to
charge VAT until 30 days after the case is ultimately determined by the
First Tier Tax Tribunal.
This judgement produces useful clarity in relation to the
circumstances upon which a taxpayer is entitled to rely upon a ruling
issued by HMRC.
About the Author
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Article Published/Sorted/Amended on Scopulus 2013-08-23 09:04:10 in Tax Articles