In Parklane UK Investments Limited v HMRC [2016] UKFTT 0803 the First Tier Tribunal (FTT) found that HMRC were wrong not to suspend a VAT penalty simply because the company joined a VAT group and was no longer registered in its own name.
- Parklane UK Investments Limited (Parklane) claimed a VAT repayment of £66,000.
- HMRC visited Parklane and concluded that it only made exempt supplies and should not be VAT registered.
- Parklane was deregistered for VAT.
- Parklane then immediately became a member of a VAT group.
- HMRC issued a penalty of £19,800 (later reduced to £11,800).
- When issuing the penalty HMRC explained that the penalty “could not be suspended because it was not possible to set conditions”.
Following a review of the decision HMRC gave a more detailed reason why they could not suspend the penalty:
- Parklane is no longer registered under its own VAT registration number (VRN).
- HMRC’s opinion is that Parklane’s VRN is Parklane itself.
- It has joined a VAT group.
- Parklane no longer exists for VAT purposes because its VRN no longer exists.
- HMRC therefore cannot impose conditions against Parklane’s VRN.
- Suspension conditions cannot be transferred to another VRN.
Parklane appealed:
- HMRC were wrong to view the provisions as applying to entities as defined by VRNs.
- The law refers to ‘persons’ not VRNs which continues to include Parklane once it enters a VAT group.
- Parklane continues to have VAT obligations after joining the VAT group as any failures would be reflected in the group’s VAT position.
The FTT allowed the taxpayer’s appeal. The FTT were allowed to order HMRC to suspend the penalty because HMRC’s decision not to suspend the penalty was flawed.
Links
Our guides:
Case reference: Parklane UK Investments Limited v HMRC [2016] UKFTT 0803
