Tag Archives: tribunal

Follower Notices – a new HMRC weapon with a potentially dire impact on taxpayers

By Marcus Ward 17 July 2014

From Royal Assent of Finance Bill 2014 (expected within the next week) HMRC has a new weapon which challenges a taxpayer’s basic right to have its case heard by a Court.

This is by the introduction of “Follower Notices”. The new power allows HMRC to order one taxpayer to settle their dispute when, in HMRC’s view, a decision in another case is relevant to the issues in the first taxpayer’s case. Since taxpayer’s circumstances are unlikely to be identical to another’s, the question of which decisions are relevant involves difficult decisions on issues of interpretation and questions of fact. These are points that ought to be considered by the Court, not unilaterally by one of the parties to the litigation.

A Follower Notice gives the taxpayer 90 days to concede its dispute and pay HMRC’s estimate of the tax due. The taxpayer has only limited rights to challenge the notice, and even then any such challenge is considered by HMRC and not the Court.

If the taxpayer does not concede following HMRC’s issue of a Follower Notice, additional penalties are levied. These penalties not only significantly increase the amount which the taxpayer has at stake in the dispute but must be challenged separately.

It is clear that the changes intend to reduce the backlog of similar disputes. However, these new rules are completely one-sided and has created an environment for yet further litigation and acrimony.

Please contact Marcus if you would like to discuss this further.

Taxpayer loses in “TNT” claims lead case.

By Marcus Ward 9 July 2014

In the recent FTT case of Zipvit the court considered retrospective claims by businesses in cases where Royal Mail (and Parcelforce) had treated individually negotiated supplies of postage etc as exempt. In the previous ECJ case of TNT it was ruled that these services should have been standard rated. The claims (said to be over £1billion in total stood behind Zipvit) were made on the basis that recipients of these services could reclaim the VAT as input tax that should properly have been charged by the Royal Mail.
The three salient points where:

1. Where the supplies taxable? – On this point the court agreed with the taxpayer, the UK legislation must be read with the same restrictions as in the relevant EC Directive.
2. Was VAT due from, or paid by, the appellant? – Curiously, the judge did not agree with either party and stated that both had been labouring under a misapprehension. No further submissions were requested however, and on this point the appeal failed.
3. Lack of VAT invoice – Although HMRC have the discretion to accept alternative evidence to support an input tax claim, it was not obliged to. The FTT supported HMRC’s refusal and noted that there would, in any event, be a windfall for the applicant. The appeal was dismissed.

The judge commented that it was likely that this case would be appealed to a higher court.
If you have an appeal stood behind Zipvit, or have previously received exempt supplies from Royal Mail or Parcelforce in respect of individually negotiated contracts – please contact us for further information.

Latest from the courts – Trinity Mirror plc

By Marcus Ward 1 May 2014

Good news for taxpayers who submit returns or payments slightly late.

There is an HMRC default surcharge regime whereby a taxpayer is penalised when he fails to lodge a VAT return or payment by the due date (usually one month and one week after the end of the VAT period). There was no dispute over the fact that the return and payment was indeed a day late.

Trinity Mirror plc appealed against a default surcharge of £70,909 at the 2% rate. Broadly, the company was late twice within the same 12 month period. However, the return was just one day late and the company contended that such a surcharge was disproportionate having regard to domestic and EC legislation. Applying the Upper Tribunal’s decision in the case of Total Technology (Engineering) Ltd, the Tribunal held that proportionality had to be assessed at the level of the default surcharge regime as a whole and at the individual level by asking whether the penalty imposed on a particular taxpayer based on the particular facts of its case was proportionate. The Tribunal held that the surcharge in Trinity Mirror plc’s case was unfair as the company had been previously compliant and the default was only one day. The chairman went on to comment that this penalty was harsh and excessive in light of the low gravity of the infringement.

Because there are no provisions for the Tribunal to mitigate such a surcharge, it had no option but to completely set aside the penalty.

This may well provide a taxpayer with an additional weapon in their armoury when dealing with HMRC’s surcharges and provides additional clarity on proportionality in relation to the levying of default surcharges. There already exists a concept of “reasonable excuse” which goes toward mitigation of surcharges and there is significant case law to illustrate what constitutes a reasonable excuse. If you have received what you consider to be an unfair or harsh penalty, please contact us as experience insists that in the majority of cases we have dealt with we have been able to either remove or reduce HMRC’s penalties.

Latest on VAT/GST and International Trade

By Marcus Ward 30 April 2014

This month at a meeting in Tokyo over 250 high level delegates from over 100 countries and international organisations endorsed a framework for applying VAT to cross-border trade. There has been significant concern over the various domestic legislation applied to international trade which can result in transactions being taxed twice, or going untaxed. There has been little, or no co-ordination in the application of VAT and GST worldwide and the aim of the recent Organisation for Economic Co-operation and Development (OECD) summit was to remedy these discrepancies and endorse a new set of OECD guidelines for international trade. The new standards aim to ensure tax neutrality in cross-border transactions and a clearer taxation of B2B trade in services.

Meeting statement (with links to the relevant background) here:http://www.oecd.org/ctp/consumption/statement-of-outcomes-on-vat-gst-guidelines.pdf

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