HMRC Tries It On, and Loses!

 

In Pavan Trading Ltd, HMRC tried it on and then doubled down at the review stage.

When a business exports goods, the sale can be zero rated, but the zero rate is on the basis that the business holds evidence of export.

The taxpayer had good records and was able to produce both official and commercial evidence.

There were some anomalies in the taxpayer’s paperwork, for example, not all payments from USA customers could be identified, deliveries were not made to customers’ main addresses and the values stated on the parcels were lower than the true value.

Crucially, the HMRC officer stated the main reason for assessment was the taxpayer had not supplied HMRC with the export evidence within three months. The officer told the tribunal that had the taxpayer given the main/supplementary evidence to HMRC within three months of each export, HMRC would have accepted the export evidence for zero rating purposes.

HMRC was saying the assessment was because the taxpayer had acceptable evidence of export but that the law required the taxpayer to physically give that paperwork to HMRC within three months of each and every export.

All very nice, except for the fact the law does NOT say that!

Tribunal concluded that HMRC made two errors in law. Firstly, the three-month period for obtaining evidence does not mean the taxpayer has to provide that evidence to HMRC within three months, it simply means the taxpayer must hold the evidence in their records within three months of the transaction.

The second error was that HMRC was of the view that all the evidence of export must be contained within the CP72, ignoring established case law and HMRC’s own guidance that a basket of evidence from a variety of sources is acceptable evidence.

The tribunal concluded “This error was started by Officer Bains, perpetuated by the nonsense written by the review officer, and then compounded by HMRC’s statement of case and skeleton argument. If there was ever a counsel of perfection for the provision of export documentation, then this appellant has achieved it and we have absolutely no hesitation in allowing this appeal.”

What is clear from this case is that HMRC cannot be trusted to get things right, or even apply the law correctly!

Tax does have to be taxing.

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