HMRC have just lost a judicial review in relation to their guidance on VAT. Vacation Rentals provided credit card handling services and argued that they complied with the guidance set out in HMRC’s Business Brief 18/06 on when such services should be treated as exempt from VAT. HMRC later issued assessments, claiming that the services should be standard-rated. The company sought judicial review of HMRC’s decision, contending that “the policy is expressed in a way that is clear, unambiguous and devoid of relevant qualification”. The Upper Tribunal agreed. The judges further ruled against HMRC’s contention that “it would not be unfair or an abuse of power to resile from the guidance in that the Claimant was a “very sophisticated taxpayer”, with access to high quality advice”.
The Office of Tax Simplification recently recommended in their report on HMRC Guidance that “HMRC should undertake a consultation on the circumstances in which a taxpayer can rely on published guidance”. The decision reinforces that recommendation.