Churchill Tax Advisers have recently assisted our client in defending himself against the Insolvency Service who were seeking his disqualification as a director. Working with the client we were able to demonstrate that his behaviour, which had been considered detrimental to the public good by the Insolvency Service, was actually that of a businessman seeking to save his company as the retail market he operated in changed due to Brexit and the tough economic conditions that many areas have experienced. We were able to show that his own losses from the winding up of his business were as great as those of others. The Insolvency Service when presented with all the circumstances took the decision to take no further action.
Churchill Tax Advisers have successfully assisted a medical clinic that had been under investigation regarding the exemption of its supplies. HMRC believed that the supplies being made were taxable at the STANDARD RATE. Working with our client we were able to demonstrate that the client’s work fell completely within the medical exemption as set out in the VAT legislation. We were also able to bring to HMRC’s attention, changes in case law which also favourably demonstrated our client’s position. The outcome was that our client maintained its system of charging and did not become twenty per cent more expensive in delivering its services.
There have been many decisions released in the last few weeks in relation to late filing penalties and the various reasons why this has occurred. I will not set out any one case, but would seek to remind our readers, that excuses such as a reliance on an accountant or lack of knowledge or any similar reason, will only have a chance of success if you decide to appeal the penalty, if you have specific and documented evidence. For example reliance on an accountant does not reduce the taxpayers obligation to ensure returns are made and are correct. However, if reliance on the accountant was because the taxpayer had been incapacitated in some way and could not provide the required oversight, then if that incapacitation could be evidenced then there may be a chance the taxpayer has a reasonable excuse. It is likely as the COVID-19 crisis continues that late-filing penalty appeals by taxpayers will become common. Again, if late filing or late payments are directly linked to the pandemic the Court will wish to see direct evidence of COVID’S effect.
The FTT rejected the company’s appeal against HMRC’s refusal to allow input tax to be credited in relation to the purchase of plant and machinery. Nine purchases had been made from vendors who had subsequently become “missing” and who had not declared the VAT that had been charged on the sales. The FTT judged the Appellant either “knew or should have known”, that in eight of the nine cases there was a likelihood of fraud. No allegation is made against Peterborough Plant Sales, but as the end-user they have become responsible for the missing VAT. It is clear as these judgments are issued that if you are in a supply chain it is extremely important that you carry out due diligence to ensure that your counterparties are legitimate and competent especially when it comes to VAT. HMRC have issued new guidance on this and it is vital that traders affected obtain a copy and read it. They offer guidance on things you should do for your due diligence, but the onus remains on the taxpayers to use their judgement and to be able to demonstrate how they reached the decisions they made
This case has been recently released by the ECJ. It seeks to address some of the issues around the implementation of the Kittel principle. Although the case started in relation to a criminal investigation that went nowhere, the subsequent civil litigation where there was an attempt by the authority to withhold VAT it believed was connected to fraud led the Court firstly to say that if a taxpayer was denied access to information the tax authority held and which was material to the case, then any decision made may have to be annulled or reversed. Secondly, where VAT was withheld based on uncorroborated doubts the authority has about certain economic activity, should no longer preclude the deduction of VAT where a valid tax invoice is held. The ruling makes clear that a tax authority may require additional documents, but the only document it can require to enable the deduction of VAT is a valid tax invoice as it set out in the VAT directive.