Nottingham Forest Football Club Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 August 2022 |
| Neutral Citation | [2022] UKFTT 305 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2022] UKFTT 305 (TC)
Judge Guy Brannan, Ms Gill Hunter
Value Added Tax – Whether assessment issued out of time one year after evidence of facts sufficient in the opinion of HMRC to justify the making of the assessment came to their knowledge – VATA 1994, s. 73(6)(b) – Appeal dismissed
In Nottingham Forest Football Club Ltd [2022] TC 08577 the FTT found that an assessment issued by HMRC was not out of time because it had been issued within one year of evidence sufficient to justify making coming to the knowledge of the officers involved (VATA 1994, s. 73(6)(b)).
In order for a VAT assessment to be valid it must be issued within either two years of the end of the prescribed accounting period or within one year of evidence sufficient to justify making it coming to the knowledge of HMRC (VATA 1994, s. 73(6)(b)). In this case the club appealed an assessment on the grounds that the one year “knowledge of the facts test” was not met.
The dates relevant to the club’s case are as follows:
- 16 April 2018: HMRC officer visited club to review its VAT accounting;
- 20 April 2018: The HMRC officer again visited the club to review invoices and download the general ledger.
- 9 May 2018: HMRC was provided with a memory stick containing a downloaded copy of details held on its accounting system, Sage. At the time, the club was in the process of moving from Sage to a new accounting system, Navision.
- 11 May 2018: HMRC emailed the club to request clarification of certain entries in the Navision system.
- 24 May 2018: HMRC emailed the club to confirm details in relation to the 08/15 VAT return.
- 26 April 2019: the club emailed HMRC to agree that an amount of VAT had been underdeclared.
- 29 April 2019: HMRC issued the club with a VAT assessment.
The club’s case was that the information in the general ledger was sufficient to justify making the assessment and HMRC was in possession of the general ledger on 20 April 2018, which is more than one year before the assessment was issued.
The HMRC officers involved in the enquiry were of the view that the one year period started on 24 May 2018, before the FTT HMRC counsel suggested that it started on 9 May 2018 when the Sage records were obtained.
The burden of proof was on the club to show that the assessment was made outside the one year time limit. The FTT dismissed the club’s appeal holding that it had not discharged this burden of proof. The club did not provide the FTT with evidence as to what information was contained in the records provided to HMRC (para. [39]) and, therefore, the FTT could not conclude that the Sage data was irrelevant to HMRC’s knowledge regarding the 08/15 VAT return (para. [40]).
The onus was on the club to demonstrate to the FTT that HMRC were in possession of sufficient evidence more than a year before the assessment was issued. The fact that the club did not provide detailed information regarding the records which were provided to HMRC suggests that it was aware that it did not have a strong case.
Comment by Sarah Kay, Lead Technical Writer at Croner-i.
Mr Colin Smith, The Independent Tax and Forensic Services LLP appeared for the appellant
Ms Esther Hickey, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the respondents
[1] This is an appeal by Nottingham Forest Football Club Limited (“the Appellant”) against an assessment to VAT for the period 08/15 in the amount of £345,561 issued by the Respondents (“HMRC”) on 29 April 2019.
[2] Although in the Appellant's original grounds of appeal the quantum of the assessment was contested, at the hearing only one issue was in dispute. That issue was whether the assessment was time-barred by section 73(6)(b) VATA under Value Added Tax Act 1994 (“VATA”).
[3] In short, the issue is whether the assessment was made within one year after evidence of the facts, sufficient in the opinion of HMRC to justify the making of the assessment, came to their knowledge: section 73(6)(b) VATA. For convenience, we shall refer to this test as the “knowledge of the facts” test. HMRC argue that their knowledge of the facts was only complete on 9 May 2018 whereas the Appellant argues that HMRC had the necessary knowledge of the facts on 20 April 2018.
[4] The evidence in this case comprised an electronic bundle of approximately 250 pages and two witness statements put forward on behalf of HMRC.
[5] The first and lengthier witness statement was that of Mr Bell, an officer of HMRC. Mr Bell conducted the examination of the Appellant's VAT returns and issued the assessment in respect of the period 08/15 (“the assessment”). However, we were informed at the hearing that Officer Bell had retired from HMRC at some time after making his witness statement and before the hearing. In accordance with their usual policy, HMRC did not ask a retired former member of staff to give evidence. Instead, the second and shorter witness statement was given by Mr Pickerill, an HMRC officer who had reviewed the assessment issued by Officer Bell. Mr Pickerill gave oral evidence and was cross-examined.
[6] No witness gave evidence on behalf of the Appellant.
[7] Prior to the hearing, the Appellant made an application that no weight should be attached to Officer Bell's witness statement on the basis that he was not being made available for cross-examination. At the hearing, Mr Smith, representing the Appellant, did not object to Officer Bell's witness statement being admitted to evidence, but complained that there were a number of issues which, had he had the opportunity, he would have put to Officer Bell in cross-examination. In the event, Officer Bell's witness statement largely recited or was mainly corroborated by documentary evidence and, moreover, did not seem to be disputed by the Appellants to any material extent. It was the documentary evidence upon which both parties focused at the hearing.
[8] Prior to the hearing, we had received no explanation why Officer Bell would not be attending to give evidence. We do not think it is satisfactory for HMRC to put forward a witness statement of a witness who is unable to attend the hearing without some explanation as to why the witness is not able to attend. We make no criticism of Ms Hickey, representing HMRC, who only became involved in this appeal on the evening before the hearing, taking the place of a colleague who was suffering from illness.
[9] As we have explained, the central issue in the appeal is whether HMRC were time-barred from issuing the assessment. The statutory provision, section 73(6) VATA relevantly provides as follows:
(6) An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following–
- 2 years after the end of the prescribed accounting period; or
- one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge …
[10] Section 73(6) VATA was considered by Dyson J in Pegasus Birds Ltd v C & E Commrs [1999] BVC 56 at 61–62:
1. The commissioners' opinion referred to in s 73(6)(b) is an opinion as to whether they have evidence of facts sufficient to justify making the assessment. Evidence is the means by which the facts are proved.
2. The evidence in question must be sufficient to justify the making of the assessment in question (see C & E Commrs v The Post Office[1995] BVC 292 per Potts J).
3. The knowledge referred to in s 73(6)(b) is actual, and not constructive knowledge (see C & E Commrs v The Post Office[1995] BVC 292). In this context, I understand constructive knowledge to mean knowledge of evidence which the commissioners do not in fact have, but which they could and would have if they had taken the necessary steps to acquire it.
4. The correct approach for a tribunal to adopt is (i) to decide what were the facts which, in the opinion of the officer making the assessment on behalf of the commissioners, justified the making of the assessment, and (ii) to determine when the last piece of evidence of these facts of sufficient weight to justify making the assessment was communicated to the commissioners. The period of one year runs from the date in (ii) (see Heyfordian Travel Ltd (1979) 1 BVC 1107, and Classicmoor Ltd [1996] BVC 2352).
5. An officer's decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223) (see Classicmoor Ltd [1996] BVC 2352, and more generally C & E Commrs v John Dee Ltd [1995] BVC 361 per Neill LJ).
6. The burden is on the taxpayer to show that the assessment was made outside the time limit specified in s...
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