The First-tier Tribunal (FTT) has allowed a company’s appeal against a VAT assessment raised by HM Revenue and Customs (HMRC), finding that the assessment was made when it was countersigned by an HMRC officer and was thus made outside the statutory time limit. The case is noteworthy because HMRC attempted to depart from its guidance stating that VAT assessments will normally be treated as being made when the taxpayer is notified of them.
On 15 July 2022, the company had filed an error correction notice with HMRC in respect of several VAT periods. The notice was automatically acknowledged via email that day. More than 10 months later the company provided another copy of the notice, having contacted HMRC to enquire about progress and been told that HMRC had no record of the error correction. HMRC made an assessment for VAT of £54,468, which it notified to the company on 22 July 2023. The assessing officer had chosen to inhibit the issue of a penalty. HMRC’s internal guidance stated that the assessment should therefore be authorised by a more senior officer.
The company sought a review on the basis that the assessment had been made out of time. HMRC contended that the assessment had been made on 27 June 2023, when the assessing officer had prepared it, and was therefore within the one-year time limit. The company pointed out that HMRC’s guidance stated that the notification date would be used for time limit purposes. While awaiting a response to its request for further information, it filed an appeal with the FTT by the deadline for doing so.
HMRC applied to strike out the appeal, arguing that the FTT did not have jurisdiction or alternatively that there were no reasonable prospects of the company’s case succeeding. The assessment had not been countersigned by another officer until 18 July 2023, but HMRC argued that it had been made on 27 June and that countersigning was an internal procedure, with no right of appeal against it.
The FTT acknowledged that it could not consider arguments such as a legitimate expectation that HMRC would follow a published policy. However, the appeal concerned the date on which the assessment was made, which was a question of fact and law that the FTT had jurisdiction to decide. Disagreeing that the appeal had no reasonable prospects of success, the FTT observed that it would rarely be appropriate for it to prejudge its own conclusions before examining the evidence, particularly where HMRC has the onus of proof. The strike out application was refused.
The FTT examined a number of previous cases on the issue before concluding that, where an assessment requires a countersignature or authorisation, it is only made once it has been countersigned by the second officer. The onus was on HMRC to demonstrate that the assessment was raised in time, and its guidance strongly suggested that a countersignature is required when the assessing officer has decided to inhibit a penalty. The assessment had therefore been made on 18 July 2023, more than one year after HMRC received the error correction notice, and was thus out of time.