VAT – HMRC advice may not be reliable
A recent VAT case at the High Court serves as an important reminder that the HMRC National Advice Service (NAS) provides only general advice to taxpayers as opposed to binding rulings.
In this case, the taxpayer, who was a wholesale distributor of beverages, was given verbal advice by the NAS as to the VAT treatment of supplies made to a company from Belize with a Polish office. The taxpayer relied on this advice to zero-rate supplies by using the Polish address office. Although the HMRC officer no longer works for HMRC the short notes from the telephone conversation state that the advice given said zero-rating would only be valid if all the relevant conditions listed in the VAT notice 725 were met.
The High Court dismissed the appeal by the taxpayer to strike out an assessment from HMRC for over £300k citing the HMRC record of the conversation as well as lack of evidence as to whether HMRC were provided with all the relevant facts during the telephone conversation.
The High Court judgement concluded with a comment that even if the Court had accepted the defendant’s account of his conversation with the HMRC NAS that this alone would not override specific guidance in the VAT notice.