Noor v CRC

JurisdictionUK Non-devolved
Judgment Date26 May 2011
Neutral Citation[2011] UKFTT 349 (TC)
Date26 May 2011
CourtFirst-tier Tribunal (Tax Chamber)

[2011] TC 01209

[2011] UKFTT 349 (TC)

John Brooks (Tribunal Judge) (chairman); Richard Corke FCA (Member)

Noor

The Appellant in person

Alan Bates, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

Input tax - Claim made outside the statutory time-limit - Advice given by the commissioners - Whether appellant had a legitimate expectation to recover pre-registration input tax on supply of services - Jurisdiction - Whether tribunal had jurisdiction to consider legitimate expectation - The commissioners disallowed an input tax claim of £3,628 in the appellant's first VAT return on the basis that it related to services received more than six months before his effective date of registration - The appellant had problems with a builder during the construction of a commercial property and this resulted in litigation - Subsequently, he received three invoices from his solicitors, dated August 2007, October 2007 and February 2008 and an invoice from the Adjudicator dated December 2007 - The appellant contacted the commissioners for advice and was allegedly informed that, following his exercise of the option to tax the property, he could claim the VAT within three years - In September 2009, the appellant applied to register for VAT with effect from 1 July 2009 and in November 2009 he submitted his first VAT return - The commissioners verified the input tax claim and identified the four invoices in question - Since these related to services provided more than six months prior to registration, the commissioners refused to repay the VAT as it could not be treated as input tax under the Value Added Tax Regulations 1995 (SI 1995/2518), reg. 111 - However, the tribunal considered whether, as a result of what the appellant had allegedly been told during his telephone conversation with the commissioners, he had a legitimate expectation that he would be able to claim the input tax shown on the invoices - The commissioners contended that the tribunal had no jurisdiction to consider the appellant's claim of legitimate expectation, submitting that the language of the Value Added Tax Act 1994. Value Added Tax Act 1994 section 83s. 83 could not be extended to enable the tribunal to consider the conduct of the commissioners and to review whether they were precluded from collecting VAT which was due as a matter of law - Held, that the appeal fell within the scope of Value Added Tax Act 1994 section 83 subsec-or-para 1s. 83(1)(c) and, as such, consideration of the public law principle of legitimate expectation was within the tribunal's jurisdiction - In exercising that jurisdiction, the tribunal found that, despite his failure to seek written confirmation of the advice received from the commissioners, the appellant did have a legitimate expectation that he could recover the input tax shown on the invoices - Appeal allowed.

DECISION

1.Mr Abdul Noor appeals against the decision of HM Revenue and Customs ("HMRC") to reduce the amount of input tax on his first VAT return, for the period ending 31 October 2009, by £3,628.39 on the basis that this amount related to services received more than six months before his effective date of registration for VAT.

2.Until such time as a person is registered, or required to be registered, for VAT there is no entitlement to a credit for input tax on supplies received. However, Regulation 111 of the VAT Regulations 1995 provides for an exception to this general rule and allows for VAT on the supply of goods and services provided to a person within a specified time limit before the date from which he was registered, or required to be registered, for VAT to be treated "as if it were input tax". In the case of services the time limit is six months. The time limit for goods was increased from three to four years with effect from 1 April 2009.

3.We heard from Mr Noor who told us that he encountered problems with a builder during the construction of a small commercial property. This resulted in legal action and a reference to adjudication before the building was completed. As a result he received three invoices from the solicitors, dated 24 August 2007, 16 October 2007 and 29 February 2008 and an invoice from the Adjudicator dated 3 December 2007 (the "Invoices").

4.At the end of 2007, anticipating the final invoice from the builder, Mr Noor visited the Llanishen office of HMRC, armed with the Invoices then in his possession, to seek advice as to when he should register for VAT so as to be able to claim input tax in respect of the costs incurred on the construction of the property. He was directed to a telephone on a wall of the office on which he could contact HMRC's telephone National Advice Service ("NAS").

5.On telephoning the NAS Mr Noor explained about the construction of the property, he referred to the Invoices as these related to the property and that he was expecting the final invoice from the builder. He was told that he should keep all invoices relating to the new build as he could claim VAT under the option to tax within three years.

6.On 25 September 2009 HMRC received Mr Noor's application to register for VAT from 1 July 2009 as a voluntary registration. On 1 November 2009 Mr Noor submitted his first VAT return for the period ending 31 October 2009. This contained a claim for input tax of £28,971.91 and no output tax. An officer of HMRC visited Mr Noor on 6 November 2009 to examine the input tax claim and found that four invoices (the three solicitor's invoices and the adjudicator's invoice referred to in paragraph 3, above), on which the total VAT was £3,628.39, related to services that had been provided more than six months prior to Mr Noor's effective date of registration and could not be treated as input tax. This reduced the VAT claimed on the return by £3,628.39 to £25,243.52. This was paid by HMRC to Mr Noor on 11 November 2009. On 18 November 2009 Mr Noor appealed to the Tribunal.

7.As the invoices concerned clearly relate to services provided to Mr Noor by the solicitors and adjudicator more than six months before his effective date of registration the VAT shown on them cannot be treated as input tax under Regulation 111 of the VAT Regulations. While this may once have been sufficient grounds to dispose of this appeal, following the decision of Sales J in Oxfam v HMRC [2010] STC 686 ("Oxfam"), it is necessary for us to consider whether, as a result of what he had been told during his telephone conversation with the NAS, Mr Noor had a legitimate expectation that he would be able to claim the input tax shown on the Invoices and, if so, whether it is in our jurisdiction to do so.

8.We first consider the issue of legitimate expectation. The relevant principles to be applied can be derived from the following passage of the judgment of which Bingham LJ (as he then was) in R v Inland Revenue Commissioners ex p MFK Underwriting Agencies Ltd[1990] 1 WLR 1545 at 1569 1570 ("MFK"):

… in assessing the meaning, weight and effect reasonably to be given to statements of the revenue the factual context, including the position of the revenue itself, is all-important. Every ordinarily sophisticated taxpayer knows that the revenue is a tax-collecting agency, not a tax-imposing authority. The taxpayer's only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law: Reg. v Attorney-General, Ex parte Imperial Chemical Industries Plc. (1986) 60 T.C.1, 64g, per Lord Oliver of Aylmerton. Such taxpayers would appreciate, if they could not so pithily express, the truth of the aphorism of "One should be taxed by law, and not be untaxed by concession:" Vestey v Inland Revenue Commissioners [1979] EWHC Ch 177, 197 per Walton J. No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary. If it is to be successfully said that as a result of such an approach the revenue has agreed to forgo, or has represented that it will forgo, tax which might arguably be payable on a proper construction of the relevant legislation it would in my judgment be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled. I say "ordinarily" to allow for the exceptional case where different rules might be appropriate, but the necessity in my view exists here. First, it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the revenue's ruling, unless it is the same as an earlier transaction on which a ruling has already been given. It means that he must indicate to the revenue the ruling sought. It is one thing to ask an official of the revenue whether he shares the taxpayer's view of a legislative provision, quite another to ask whether the revenue will forgo any claim to tax on any other basis. It means that the taxpayer must make plain that a fully considered ruling is sought. It means, I think, that the taxpayer should indicate the use he intends to make of any ruling given. This is not because the revenue would wish to favour one class of taxpayers at the expense of another but because knowledge that a ruling is to be publicised in a large and important market could affect the person by whom and the level at which a problem is considered and, indeed, whether it is appropriate to give a ruling at all. Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification.

In so stating these requirements I do not, I hope, diminish or emasculate the valuable, developing doctrine of legitimate expectation. If a public authority so conducts...

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