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HMRC internal manual

VAT Groups

VAT groups - protection of the Revenue: things that Customs must do when using revenue protection powers

When considering using our revenue protection powers, you must:

  • identify the amount of revenue at risk. A vague assertion that there is revenue at risk in theory will almost certainly render the decision unsustainable.
  • be able to demonstrate with evidence, ultimately before a Tax Tribunal or a higher court, that you have good and reasonable grounds for coming to the conclusion that you needed to use the revenue protection powers. Decisions made on the basis that the companies concerned have a history of avoidance or that “it all looked very artificial”, if not backed by evidence, will almost certainly be unsustainable.
  • keep good notes of the entire process. You should keep written records of all the factors that you took into consideration when making the decision and details of your reasons for exercising your powers. These notes should be sufficiently full and legible to be capable of production at a Tribunal hearing. Failure to be able to produce an audit trail for the decision may lead to the refusal being unsustainable.

Furthermore, when you communicate your decision to the applicant, you must either give full details of why you invoked your powers; or offer to provide full details of the reasons for invoking your powers, should the taxpayer wish you to do so.