Simpson and Marwick v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Lord Young |
| Neutral Citation | [2011] UKUT 498 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Date | 20 December 2011 |
| Subject Matter | Tax,20 December 2011 |
| Published date | 01 December 2016 |
[2011] UKUT 498 (TCC)
Appeal number: FTC/85/2010
VAT – Bad Debt Relief – Solicitors acting on instructions of insurance
companies – insured party registered for VAT – invoice for VAT element of
fees rendered on insured party Bad Debt Relief claimed in respect of unpaid
VAT.
UPPER TRIBUNAL
(TAX & CHANCERY CHAMBER)
SIMPSON & MARWICK
Appellant
-and-
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
Tribunal Judge: LORD DRUMMOND YOUNG
Sitting in Edinburgh on 17 June 2011
W.J. Wolffe, QC, for the Appellant
K. Campbell, Advocate, for the Respondents
© CROWN COPYRIGHT 2011
2
[1] The appellants, Simpson & Marwick, Solicitors, have appealed against a
decision of the Commissioners for Her Majesty's Revenue and Customs to assess
them in the sum of £322,843 of Value Added Tax in accordance with section 73 of
the Value Added Tax Act 1994. The appellants had reclaimed that amount by way of
bad debt relief in respect of VAT periods running from the period 1 May to 31 July
2004 to the period 1 February to 30 April 2007. The amount at issue was ultimately
agreed at £216,862.36.
[2] The appeal was heard by the First-tier Tribunal, who rejected it and held that
the appellants had been properly assessed in the amended sum of £216,862.36. The
appellants have now appealed to the Upper Tribunal.
Material facts
[3] The material facts, which were not in dispute, were stated by the First-tier
Tribunal as follows. The appellants are a firm of solicitors practising in Edinburgh.
They have been registered for VAT since 1 April 1973. The greater part of their
practice relates to the provision of legal services in respect of insurance claims. In
such matters, they are instructed by insurance companies, but they also have a
professional responsibility towards the insured person. Prior to 1 January 1985, they
sent their fee notes to the insurers who instructed them with the expectation that the
insurers would pay VAT on all their fees and outlays as well as the fees and outlays
themselves.
[4] Immediately prior to February 1985 the Commissioners of HM Customs and
Excise reached an agreement with the British Insurance Association and other bodies
connected with insurance in respect of such fees and outlays. A direction was
published in the Journal of the Law Society of Scotland in February 1985 in the
following terms:
"Legal services in insurance claims
The Commissioners of HM Customs and Excise have agreed with the British
Insurance Association and other insurance bodies that policy-holders who are
registered for VAT can count as input tax VAT incurred on legal services supplied to
them in connection with an insurance claim relating to their business.
From 1st January this applies whether the solicitor is instructed by the policy-holder
or by the insurer on his behalf and whether or not in practice the proceedings are
controlled by the insurer. It has also been agreed that, normally, such legal services
are supplied to the policy-holder not the insurer even where the insurer exercises his
right of subrogation to pursue or defend a claim in the name of the policy-holder".
[5] Supplementary information was given in the issue of the Journal of the Law
Society of Scotland that appeared in March 1985 in the following terms:
"VAT on legal fees-insurance claims
The Society has received the following letter from the Secretary-General of the
British Insurance Association.
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