HMRC has come a cropper in a first tier tribunal in the case of The Barty Party Co Ltd (TC06116).
AccountingWeb reports that the publican was in hot water with HMRC for failing to produce the books and records requested by a visiting HMRC officer in an information notice dated 10 November 2016.
The FTT supported the taxpayer and said that the notice had a “fundamental flaw.” It pulled the plug on HMRC and allowed the landlord’s appeal against the notice and associated penalty.
HMRC has the power to request information that is “reasonably required for the purpose of checking the taxpayer’s tax position”, (FA 2008, Sch 36). The key factor that persuaded the judge was that although the legislation gives HMRC the power to request information for the previous six years, their power of assessment is restricted to four years (VATA 1994 s 77). He felt that the onus was on HMRC to explain why information was required for the extra two years and because the officer had failed to do this, the notice was invalid and had a “fundamental flaw.”
Why did the officer ask for information covering the period 1 February 2012 to 30 November 2012 (as well as the other periods) when she had no power of assessment for these months, ie because the notice was issued in November 2016?
HMRC has the power to go back up to 20 years in the case of fraud, but in the Barty Party case there was no indication of deliberate errors being made. There was also another anomaly; an earlier visiting HMRC officer had apparently already reviewed the records up to 30 April 2012!
Overall, this was not a good day out of the office for HMRC. They also had to withdraw a £300 penalty issued on 21 December 2016, which was imposed when Mr Barton failed to provide the information requested in the flawed information notice.
Tax does have to be taxing.
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