HMRC VAT tactics ‘prejudicial to justice’ says High Court


HMRC has repeatedly submitted evidence to the VAT and Duties Tribunal late to gain an unfair advantage in cases against traders. The High Court told HMRC its delaying tactics are “prejudicial to the administration of justice”.

In the High Court earlier this month, Mr Justice Lewison upheld the decision of the VAT and Duties Tribunal in January to kick out of court finally the late submission of evidence by HMRC in its case against trader Brayfal, which has £1.5 million input tax denied by HMRC on the grounds of ‘means of knowledge’ of VAT fraud. Brayfal was also awarded 100 per cent costs. HMRC had appealed the tribunal decision to the High Court.

Mr Justice Lewison said: “Modern case management attaches importance to compliance with orders and directions. Failure to comply increases the costs to the parties, delays adjudication and requires the devotion of more time of the tribunal. This failure is prejudicial to the administration of justice itself.”

Brayfal’s lawyers The Khan Partnership, led by prominent VAT lawyer Hassan Khan (pictured), said: “This case has a serious impact on all similar cases before the VAT tribunal and directly affects and reduces the medium term effectiveness of HMRC’s tactics of slow, stalling and piecemeal disclosure and unwillingness to lay its cards on the table with clear evidence and allegations.”

The High Court’s verdict is likely to have an impact on HMRC’s high-cost appointment of forensic accountants KPMG, which it installed to go through evidence against the trade and present it to the tribunal and High Court on its behalf, starting in late April.

It’s the first time HMRC has sought external help in its fight against VAT fraud, after it lost two high-profile cases in quick succession earlier this year (the £2.3 million Livewire case and £1.8 million Olympia case).

The ruling will likely see KPMG employed at a later date as the deadline for evidence for cases being heard in April and May has passed.

A decision on Brayfal’s withheld input tax is due shortly.

HMRC was unavailable for comment.