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HMRC internal manual

VAT Assessments and Error Correction

Protective assessments: Giving effect to a tribunal decision or court judgement

Tribunal decision

If a business appeals successfully to a First-tier tribunal you must normally give effect to the decision. But this does not apply to other businesses who, and even where the circumstances are identical

  • did not appeal
  • appealed unsuccessfully
  • are awaiting their own appeal on the same grounds, or
  • had their case stood over pending the lead case.

This is because a First-tier tribunal decision does not create a legal precedent, and therefore there is no requirement to apply the decision to other businesses unless the relevant liability team accepts the tribunal ruling and publishes guidelines giving effect to a particular tribunal decision.

Upper Tribunal, Court of Appeal or European Court Judgements

The judgements of these Courts do create a legal precedent, until such time as the judgement is overturned.

Therefore, where a higher court rules in favour of a business, there is a legal obligation to apply the law of the day and not to only give effect to that judgement, but also to apply any fresh interpretation of the law to all businesses in identical circumstances.

This applies even if HMRC lodges a further appeal to have the judgement overturned. Any VAT refunds or payments made as a result of claims from businesses as a result of the judgement may in fact only be temporary.

Therefore, in the event that HMRC successfully contests the judgement, VAT will be put at risk if you do not take the necessary action to protect the revenue.