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HMRC internal manual

VAT Statutory Interest Manual

Official error case law: failure to give advice was not official error

J L Peart & P A Peart trading as the Border River - and - C&E Commissioners MAN/96/0433Y (VTD 14672)

A grocer was visited by Customs in 1990. At the taxpayer’s request the visiting officer examined his VAT records at his tax advisor’s premises. During the visit the officer was informed that the business’s owners were considering running a café from the premises, although nothing was planned for at least 6 months.

From the information provided at that stage, the officer was satisfied that the trader was accounting for tax under Retail Scheme D. When the café business eventually started the owners did not account for the café’s takings under Retail Scheme D, although the scheme was still used for the grocery takings.

In September 1995 the taxpayer submitted a refund claim on the basis of a retrospective change of Retail Scheme from D to F. The taxpayer also requested statutory interest on the refund, on the basis that the visiting officer in 1990 had failed to point out that Scheme D could not be used where supplies of catering were made. On this basis the appellant said HMC&E had made an error for the purpose of section 78 VAT Act 1994.

The Tribunal refused the claim on the grounds that:

  • It is a taxpayer’s responsibility to choose the scheme most suited to its business.
  • After the café business was established the taxpayer kept using Scheme D on the advice of their tax advisors.
  • During the visit to the accountant’s premises, the officer was not told anything that would have caused him to decide that Scheme D was inappropriate for supplies of catering.

HMC&E Public Notices made it very clear that using Scheme D was inappropriate for supplies of catering.

A similar decision was reached in RJN Creighton BEL/93/57

VATA s78