In Totel Ltd v HMRC [2018] UKSC 44, the Supreme Court (SC) dismissed the taxpayer's appeal, agreeing that the requirement for the appellant to pay VAT on account before it can appeal was not discriminatory.

  • Totel appealed against VAT assessments raised by HMRC.
  • In order to proceed they had to pay or deposit the VAT assessed, unless they could demonstrate that to do so would cause them undue hardship.
  • Totel appealed against this required on the basis that it was not required for any direct tax appeals and was therefore discriminatory.

The SC found that the fact that there was no requirement for direct tax payments on account to be made was not discrimatory:

  • VAT is a tax of which the economic burden falls upon the ultimate consumer but which is collected by the trader and accounted for by the trader.
  • By contrast Income Tax, CGT, SDLT etc. are taxes where the economic burden falls on the individual taxpayer directly and which is not collected for HMRC by anyone else.
  • Whilst acknowledged that PAYE is collected by an employer on behalf of an employee, ultimately it is the individual employee's liability and HMRC have recourse to the employee for any underpayment of tax. For VAT, HMRC can only have recourse to the trader.
  • There was no equivalence between VAT and the other direct taxes, which means there was no discimination.

The appeal was dismissed: to make a VAT appeal, the VAT muse therefore be paid or it shown that to do so would cause undue hardship.


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External link: Totel Ltd v HMRC [2018] UKSC 44


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