R (on the application of S&S Consulting Services (UK) Ltd) v Revenue and Customs Commissioners

JurisdictionEngland & Wales
Judgment Date26 November 2021
Neutral Citation[2021] EWHC 3174 (Admin)
CourtQueen's Bench Division (Administrative Court)
R (on the application of S&S Consulting Services (UK) Ltd)
R & C Commrs

[2021] EWHC 3174 (Admin)

Mr Justice Julian Knowles

High Court (Queen's Bench Division)

Value added tax – Injunctive relief from deregistration requested – HMRC deregistered company due to concern that registration was being used for fraudulent purposes – Relief denied.

The High Court denied the appellant's request for injunctive relief from compulsory deregistration while it was waiting for its appeal against the deregistration to be heard by the FTT.


S&S trades as an employment business and has been registered for VAT since February 2012. In August 2021, after an investigation which began in April 2020, HMRC wrote to S&S advising that it had been compulsorily deregistered for VAT on the grounds that it was “principally or solely registered to abuse the VAT system by facilitating VAT fraud” (para. 3). Prior to the deregistration, in May 2021, HMRC assessed S&S for just over £23m of underdeclared VAT.

S&S denies that it is involved in VAT fraud and has appealed these decisions. The FTT has expedited the hearing and it is due to take place in February 2022.

S&S applied for injunctive relief, i.e. the reinstatement of its VAT registration, because without this it cannot trade above the VAT registration threshold and, it argues, there is a high probability that it will be insolvent before the FTT hearing (para. 38).

The High Court reviewed previous case law concerning injunctive relief, including R (on the application of Ingenious Construction Ltd) v R & C Commrs [2020] BVC 15, which also concerned a company which had been compulsorily deregistered for VAT. The Court noted that:

  • HMRC does have the power to deregister persons if the VAT registration is being fraudulently misused (para. 93), and it is Parliament's intention that HMRC should have this power (para. 94);
  • For a court to grant injunctive relief it is not sufficient that the decision to deregister be one to which HMRC could not reasonably have come, it must be unlawful on some other ground such as being an abuse of power (para. 60, para. 96);
  • The fact that the person has a pending appeal which has a realistic prospect of success is not grounds for injunctive relief (para. 66);
  • The merits and reasonableness of HMRC's decision to deregister are for the FTT to consider (para. 77).

The High Court refused S&S's request for injunctive relief. It considered that S&S had not demonstrated that there had been any abuse of power by HMRC. It accepted that S&S “may well have answers for all the allegations” made against it, but this was a matter for the FTT (para. 103).

A central feature of S&S's abuse of power argument was that HMRC had not, in the form of a “minded to” letter, given it proper warning that deregistration was being considered (para. 105). The court noted that in an investigation concerning potential fraud HMRC might have good reasons not to tip-off a business that deregistration was a possibility (para. 106). It also noted that it was clear from the correspondence that HMRC was investigating serious VAT losses. The company had received an assessment for £23m due on undeclared sales and HMRC's correspondence all came from HMRC's Fraud Investigation Service. S&S was professionally advised throughout and its advisors should have warned it that deregistration was a possibility.

Finally, the court dismissed S&S's argument that the deregistration was a breach of its rights under the European Convention on Human Rights (para. 116-127). A key plank of this part of S&S's case was that it was at high risk of becoming insolvent before the FTT case was heard, even though the FTT had expedited the hearing. The expert witness S&S provided had considered that it would run out of money on 3 October. As this had not happened, “the accuracy and reliability of [this opinion] was thrown into doubt” (para. 120).


The High Court was clear that, where a VAT registration is being used for fraudulent purposes, HMRC do have the power to deregister persons for VAT and it is for the FTT to consider the merits of that decision. While a compulsory deregistration may make it difficult for a business to trade, the Court's powers to order a re-registration are limited to cases where another factor, such as abuse of power, renders the decision unlawful. S&S failed to construct a case that its circumstances passed this high threshold.

Aparna Nathan QC and Joshua Carey (instructed by Frisby and Small LLP Solicitors) appeared for the Claimant

Jonathan Kinnear QC (instructed by The Commissioners for HM Revenue & Customs) appeared for the Defendant

Mr Justice Julian Knowles:

[1] This is a renewed application for injunctive relief by the Claimant, S&S Consulting Services (UK) Limited (S&S), following refusal on the papers by the single judge.

[2] S&S seeks a mandatory injunction under s 37 of the Senior Courts Act 1981 (SCA 1981) requiring the Defendant, the Commissioners for Her Majesty's Revenue and Customs (HMRC), to re-register it for VAT pending either: (a) the outcome of its application for judicial review of HMRC's decision of 27 August 2021 to de-register it for the purposes of VAT (the Decision); and/or (b) pending the outcome of its appeal to the First-tier Tribunal (Tax) (the FtT) against the Decision and a related VAT assessment.

[3] HMRC cancelled S&S's registration because, following an investigation, they concluded that S&S was principally or solely registered to abuse the VAT system by facilitating VAT fraud.

[4] It is right to make clear at the outset that S&S strongly denies that allegation and any wrongdoing.

[5] It is common ground that the Decision has serious potential consequences for S&S's ability to carry on in business. It is now unable to issue VAT invoices for taxable supplies. S&S says it may even become insolvent as a result. For example, the Decision has the effect of limiting S&S's lawful turnover to the VAT threshold of £85 000; if S&S were to trade in excess of that figure then it might be acting unlawfully. It is also common ground that although S&S has lodged an appeal to the FtT against the Decision, the Tribunal has no power to require HMRC to re-register S&S by way of interim relief pending the outcome of the appeal.

[6] S&S's application for permission to seek judicial review is outstanding and has not yet been considered on the papers. The parties were agreed that the only matter before me is the renewed application for injunctive relief.

Legislative framework: VAT registration and de-registration

[7] VAT is a tax levied on goods and services provided in the UK in the course of business. It is charged on a percentage basis of the price of the goods and services provided. There are different percentage rates for different categories. The standard rate is currently 20%.

[8] The principal domestic legislation concerning VAT is the Value Added Tax Act 1994 (VATA), which gives effect to EU VAT law. The principal piece of EU legislation is the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 11.12.2006) (the Directive).

[9] Section 3(1) of VATA provides that a person is a taxable person for the purposes of VATA while he is, or is required to be, registered under the Act. Section 3(2) provides that Schs 1 to 3A shall have effect with respect to registration. Schedule 1 is the principal one for the purposes of this case.

[10] Section 4(1) provides that VAT must be charged on any supply of goods or services made in the UK, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. By s 4(2), a taxable supply is a supply of goods or services made in the UK other than an exempt supply (a term defined in s 31 and Sch 9).

[11] In summary terms, [1] of Sch 1 provides that a person who makes taxable supplies in excess of the prescribed levels in the prescribed circumstances, is liable to be registered if not registered. For example, [1(1)(a)] of Sch 1 provides that a person who makes taxable supplies but is not registered under the Act becomes liable to be registered under Sch 1 if at the end of any month, the person is UK-established and the value of his taxable supplies in the period of one year then ending has exceeded £85 000 (that figure being provided for in the Value Added Tax (Increase of Registration Limits) Order 2017 (SI 2017/290)).

[12] A taxable person is required to account to HMRC for the VAT they charge on their taxable supplies in the manner specified in VATA and the regulations made under it. In very simple terms, at the end of each relevant period, the taxable person must: calculate the VAT he has charged his customers during that period on his taxable supplies (the output tax); calculate the VAT he has paid out on supplies to him during that period (the input tax); deduct the amount of input tax from the amount of output tax, and account to HMRC for the difference (or reclaim VAT if the figure is negative). This is done by the taxable person completing a VAT return for each period. If, on that return, the taxable person under-declares the value of the taxable supplies they have made during that period, and thus the amount of VAT owing, then there is scope to deprive HMRC of the VAT which is properly due to them.

[13] By way of hypothetical illustration: suppose during the relevant accounting period the taxable person makes £100 000 of taxable supplies at the standard rate of 20%, with (for simplicity) zero input tax. He will have charged his customers £20 000 VAT, which is the amount owing to HMRC at the end of the period, for which he must account. But if on his VAT return he wrongly declares only having made £50 000 of supplies during that period, and hence having only charged £10 000 in VAT, and only accounts to HMRC for that amount, then HMRC is deprived of £10 000 in VAT which is due to it, and...

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