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archived case summaries
The transition from Inland Revenue and Customs and Excise to HMRC means that the areas of work that were dealt with by the two separate organisations historically now fall under one single umbrella.
In the past, 'misdirection' was the single most common basis for complaints from traders about VAT. Customs and Excise always considered claims to misdirection under the relevant extra-statutory concession published in their Notice 48. We look to see whether HMRC have exercised their discretion under the concession fairly and consistently.
VAT case summary
Mr E practised as a health care professional for many years. In April 2002, he was advised correctly by his accountants that, because he was not on a statutory register maintained in accordance with the legislation, his services were not exempt from VAT. On that basis, he registered for VAT and his first VAT return, covering a twelve-year period, reported a substantial amount of VAT due.
Mr E complained that Customs and Excise were unreasonable when they refused to apply their misunderstanding concession and remit the arrears of VAT.
We did not uphold this complaint.
We concluded that not all the conditions of the misunderstanding concession were satisfied. The need for Mr E to be statutorily registered, if his services were to be exempt from VAT, was an aspect of tax clearly covered in Customs and Excise's published guidance.
In November 2002, Customs and Excise had said that some of the services supplied by Mr E were directly supervised and were, therefore, exempt from VAT. A month later they said that the advice was wrong, because there was no direct supervision. They acknowledged that their earlier advice constituted misdirection and agreed to remit the VAT for the relevant month.
Mr E's accountants argued that, since Customs and Excise had 'got it wrong' in relation to direct supervision, Mr E should be forgiven for his misunderstanding about the need for statutory registration. We did not accept this argument, taking the view that the accountants were seeking to connect two issues that should be considered separately.
Mr E made representations through his accountants about the financial burden that he now faced when he had genuinely believed that he was exempt from paying VAT. We did not, however, conclude that Customs and Excise acted unreasonably when they declined to grant an individual extra statutory concession and remit the VAT.
We concluded that Customs and Excise gave proper consideration to Mr E's financial circumstances. They had recognised that belated notification cases are relatively common, often leading to large and unexpected VAT bills for suppliers. In reaching their decision on this case, they were clearly concerned about the potential unfairness if there was remission in one such case and not in others. We did not think that it was unreasonable of them to take this into account when reaching their decision.
