HMRC dealt body blow over VAT appeal costs

Ruling means HMRC won't automatically have its legal costs covered by traders if they lose an appeal

A commercial law firm has won a significant ruling over HM Revenue & Customs (HMRC) which will seriously affect the government’s handling of its Extended Verification VAT backlog.

Jeffrey Green Russell (JGR) solicitors, acting on behalf of trader Atlantic Electronics Limited, celebrated victory earlier this month when Judge Justice Warren, president of the Upper Tier Tribunal of the Tax Chamber, dismissed HMRC’s appeal this month to dissaply Rule 10 of its 2009 Rules and paved the way for a fairer approach to paying for court costs.

In the past it has taken up to six years for HMRC to conclude its Extended Verification process, denying the traders in question the right to their VAT repayments and preventing them from defending their rights in court.

Many were put off pursuing their cases because they had to provision for their own costs and also for HMRC’s on top if they lost a case which could run into the hundreds of thousands.

As a result of this latest ruling any future Tribunal will now have the power to award costs equally to both sides and create a more level playing field for traders caught up in the process.

The ruling will force the Treasury to tighten its control over the process to avoid future costs spiralling out of control.

Many of these appeals have been in place since 2006 and a lot of taxpayers have had no money back.

A source close to the case told CRN: “This is an interesting judgement because many people could not afford to fight their cases , because they could not cover HMRC’s expenses – particularly if the case has lasted many years – so they more often than not didn’t pursue the case further.

“Now with this ruling, this will minimise the risk to traders when fighting HMRC and not allow HMRC to drag these cases on for years. People can start to put up a fair fight now this law is in place, and hopefully get their money back. There has been millions of pounds withheld over the past six years and now it is time for them to fight back.”

To read the full judgment click here.