In Global Foods Limited v HMRC [2017] UKFTT TC06020, the First-Tier Tribunal (FTT) concluded HMRC made reasonable enquiries for the purposes of the repayment supplement, despite that it later proved that those enquiries were based on incorrect law.
Repayment supplements are due on VAT repayments where the repayment is made more than 30 'net days' after the submission of the VAT Return. In calculating the 'net days', HMRC can deduct days taken to make reasonable enquiries into the claim.
The facts in this case are long and complex. Broadly:
- HMRC started a verification check into a repayment VAT return.
- Various chains of correspondence and meetings took place over several months, in fact, the total period between submission and eventual repayment was well over a year.
- Within the enquiry, HMRC insisted, erroneously, that the company should be registered in Netherlands, in order to zero-rate the movement of some of its own goods from UK to Netherlands.
- In Global Food Ltd & Others v HMRC [2014] UKFTT TC04200, the FTT agreed with the taxpayers, that zero-rating on exports of goods to another country, did not require the customer to be registered for VAT in that other country.
- This meant that Global Foods did not need to be VAT registered in Netherlands in respect of the movement of its own goods.
- The VAT repayments were eventually made, after more than 500 days and Global Foods claimed that a repayment supplement should be included.
- The repayment was made within 30 days of Global Foods providing HMRC with a certificate showing they were VAT registered in Netherlands (having gone and registered there following HMRC’s erroneous insistence).
- The certificate of registration in the Netherlands was the last piece of information required in the enquires and as this was not actually required, as found in the subsequent 2014 FTT decision, it was not a reasonable enquiry to want to see the certificate.
- HMRC were of the view that they had conducted reasonable enquiries and therefore, the repayments were made within 30 days of the repayment supplement ‘clock’ starting, i.e. within 30 days of being given the information reasonable required.
- They believed at the time that registration in Netherlands was necessary.
- They undertook reasonable enquiries in respect of that belief.
The FTT ultimately agreed with HMRC:
- Despite that fact that the law did not actually require the taxpayer to be registered for VAT in the Netherlands, HMRC’s Notice specified that it was a requirement and suggested that part of the notice had the force of law.
- HMRC were entitled to consider the enquiry in respect of, and request evidence of, registration in the Netherlands as reasonable.
- The repayment supplement clock, for the vast majority of the repayment, did not start until after the certificate was received.
- The repayment was made within 18 days of this certificate being provided and no repayment supplement was due.
The FTT did, however, agree with the taxpayer that part of the repayment, some £99,100 could have been made earlier, once enquiries in relation to that aspect of the verification check had been dealt with.
The repayment was made 81 days after reasonable enquiries were concluded in respect of that part of the repayment. £4,955 repayment supplement was due.
Editor’s comments:
This decision provides two interesting aspects:
- Where there are various aspects to a verification check, they could be considered separately in terms of the repayment supplement ‘clock’. This could mean that delays to repayments because of one aspect, where all others are covered, are entitled to some form of supplement.
- Even if HMRC make a technical error or error in law, this does not automatically mean that the enquiries in respect of that error are unreasonable. This feels unfair, but HMRC were acting in good faith and in accordance with what they believed was law making the enquiries reasonable in the view of the courts.
Links
VAT reclaims and unjust enrichment
External link: Global Foods Limited v HMRC [2017] UKFTT TC06020
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