CTM has received an important written decision from the Tribunal in an appeal that we handled on behalf of a Mexican Restaurant.

It relates to an appeal CTM lodged in 2018 to the First Tier Tax Tribunal against a decision of HMRC to issue a Notice of Requirement to Give Security due to previous VAT arrears. CTM attended the hearing on behalf of the restaurant’s director and argued 3 key points.

The Judge found in our client’s favour on all 3 points, namely:

1. The VAT Security Notice was unlawful because it did not contain reasons why it was issued;
2. The VAT Security Notice was unlawful because it did not give the client an opportunity to make representations about future trade and, therefore, ignored potentially relevant facts; and
3. HMRC should have issued a pre-Notice letter asking the client if it wished to make representations.

This is a Tribunal decision that has far reaching consequences for HMRC, partly because all VAT Security Notices are still being issued without reasons and a trader is rarely given the opportunity to make representations.

A Tax Tribunal can only find in a trader’s favour if HMRC’s decision took matters into account that were not relevant or failed to consider matters that may be relevant.

The decision now ensures traders have the opportunity to explain why there were previous VAT or PAYE arrears and why the circumstances that led to previous liabilities are unlikely to occur in the future. Previously, and wrongly, HMRC believed they could simply issue a VAT or PAYE Security Notice without even considering if circumstances had changed. That approach has now been found to be unlawful.

Click here to review the full Tribunal decision.