In an interesting case, the Scottish Court of Session has highlighted the importance of checking whether HMRC assessments have been issued correctly.
This case concerned an IndianRestaurant based in Edinburgh. The restaurant which was established in 1995 was operated by a succession of companies with separate VAT registrations. HMRC formed the view that these companies were mere shams and that the restaurant was operated by four individuals who operated as a partnership.
HMRC notified the business during 2002 that the business would be registered with effect from its date of establishment in 1985 and issued an assessment for the period from September 1995 to July 2002 and a subsequent penalty for “evasion and dishonesty”.
The business appealed to the Tribunal on the basis that the assessment and penalty were invalid and the appeal was upheld. HMRC then appealed this decision.
In a detailed judgement the Court of Session carefully looked at the underlying VAT legislation and found that HMRC had erred in the way it issued the assessment and penalty and their appeal was dismissed.
The facts of this case whilst somewhat unusual bear testament to the importance of HMRC correctly issuing assessments and penalties. Taxpayers need to be aware of this fact as where HMRC have made errors they may be unable to pursue taxpayers for payment.