VAT News:

Alliance & Leicester Win Important Tribunal Decision on Repayment Supplements

The main issue is whether HMRC had the right to stop the 30-day clock and whether they were conducting reasonable enquiries. Alliance & Leicester ("A&L") had a claim of approximately £2.2 million for period 03/04. Their VAT return was received by HMRC on 7 May 2004 and repayment was authorised on 16 June 2004 - a period of 41 days. The dispute is whether, out of those 41 days, any period of time can be left out due to 'the raising and answering of any reasonable enquiries'. HMRC argued that, as they visited the company on 18 May 2004 to ask further questions, the clock should have started from this point and not from when the return was submitted. It transpired that A&L, in line with many other large financial institutions, was the subject of ongoing enquiries from HMRC as to the fairness and reasonableness of its partial exemption special method and that the 18 May 2004 was a pre-planned visit as part of that dialogue. The Tribunal Chairman concluded that the 18 May 2004 visit was a routine audit visit and not the raising of a specific enquiry on the 03/04 return and, hence, 18 May 2004 could not be regarded as the date on which the repayment supplement period 'started running'. Chairman goes on to conclude that, on this basis, it could not be the case that as many as eleven of the days between 7 May 2004 and 16 June 2004 were taken up with reasonable enquiries on the 03/04 return and hence the appeal must be allowed.

At the hearing, A&L had argued that, even if the concerns over the partial exemption special method were valid, the maximum amount under dispute could only have been £200,000 out of the £2.2 million claim, and HMRC had not made an interim payment of the uncontentious element of the claim. The Chairman comments:

I should conclude, for completeness, with a brief observation about A & L's complaint that no interim payment was made even though, as the Commissioners, I think, accept, the amount in dispute could not have exceeded £200,000. Both Mr Boshell and Mr Humphreys [HMRC officers] told me, to my surprise, that they were not aware that the Commissioners could make an interim payment. To my knowledge they do so, and quite often. It would have been the obvious course to adopt in this case and, had it been adopted, I think it unlikely that A & L would have sought (or have been eligible to receive) repayment supplement.

A & L received 5% repayment supplement on the full amount. For the full decision, please click here

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