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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

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2013-08-23 09:04:10 in Tax Articles

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