It appears that HMRC, contrary to their own self belief in their infallibility, are in fact fallible. Especially when they rely on Wikipedia to support their views.
Contractor Weekly reports that HMRC recently lost a First Tier Tax Tribunal case because of its over reliance on the Wikipedia definition of “electromechanical.”
The case of RJS Electronics Ltd v HMRC (February 2016) involved the classification of four switches for the purposes of customs duty. HMRC classified the switches as “push button switches” which attracts a duty of 2.3% whereas RJS contended they were “electromechanical snap-action switches” which attracts a duty of 0%.
In May 2014 HMRC’s Review Officer issued his decision based largely on the definition of “electromechanical” taken from Wikipedia and said, “there is little guidance on this type of product and the Wikipedia information is not altogether clear but all things considered I must…..uphold the decision.”
However, what HMRC didn't admit to was the fact that they used only a selected portion of the Wikipedia defitnion that suited them best.
RJS, during appeal, challenged the Review Officer’s reading of the Wikipedia definition saying, “the HMRC representative used Wikipedia to come to their decision, however they are taking the terms out of context……they have ignored [part of the definition] even though they have quoted it…..they have stated that their sources are not clear and have just chosen to read the outcome that suits HMRC best. It is very important that someone classifying electronic goods is not just reading some page on the internet but they have at least a minimal understanding of the electronic terms.”
A week before the Tribunal hearing HMRC asked for the hearing to be adjourned and that the parties be directed to appoint a single joint expert who would provide an authoritative opinion on the switches. Such an expert would have cost several thousands of pounds and even though the tax at stake was less than £1,000, HMRC justified their suggestion on the basis that it would help with future decisions. The Tribunal considered an expert witness’ costs to be disproportionate and both HMRC’s requests were dismissed.
The Tribunal found in favour of the taxpayer and pointed out that the Wikipedia and OED definitions were “not entirely consistent” and unreliable.
The lesson here is that HMRC manipulates sources and facts to best suit its own objectives.
Do not trust HMRC!
Tax does have to be taxing.
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