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Andrew Needham, of Consultancy firm VAT Solutions, comments on an interesting result in a recent VAT tribunal - and asks if professional representation is always the better option

Andrew Needham

Introduction

The recent tribunal case of Martin Jamieson Motor Repairs (VTD 20,269) was such a breath of fresh air and common sense that it almost restores one’s faith in the tax system (though not in HMRC, alas). The decision is worth a read just because its whole tone will cheer you up, but in summary, it is about the circumstances in which a trader (in this case, a small garage doing MOTs) can treat expenses as VAT-free disbursements.

The trader represented himself, and it clearly did his cause no harm that the VAT Tribunal found him to be a "transparently honest man who had been trying to deal correctly with his VAT affairs."  As a result, the Tribunal bent over backwards to come to the right decision, and had little time for pedantic and legalistic contentions put forward by HMRC, which it found totally unrealistic", "fanciful", "quite extraordinary" and “stunning”.  The Tribunal also savaged VAT guidance as "extremely confusing at best, or otherwise just wrong".

Taxpayer v professional representation

To be fair, whenever the taxpayer represents himself, he loses in about 80% of cases, but when he has professional representation, he is successful in more than 50% of cases.  This case, however, is an example of when it can work. The trader argued one relatively simple point where the guidance was confusing, and he had clearly done his best to comply. One small change to the invoices would have sorted the problem, but HMRC were clearly being pedantic.  Sometimes in these types of cases, if the taxpayer turns up with a tax adviser and solicitor, the Tribunal may wonder how he could afford this representation when he did not take the relevant advice to begin with. Obviously, in cases where a particular technical legal matter is argued, professional representation can be essential.

Practical points

We believe that there are at least two points for advisers to pick up from the case.

Point 1

Obviously, the first is the need to try to avoid the problem in the first place by ensuring that HMRC’s detailed invoicing requirement for disbursements are met. It is quite evident that HMRC focused far too much on the form of the invoices, and far too little on what was actually the legal position: a minor change to the invoicing would apparently have prevented the case ever coming before the Tribunal.

Point 2

The second point is that your adviser may want to consider that in some cases the right strategy may simply be to let your client speak for himself before a VAT Tribunal or other appeal body.  Blunt honesty (as in this case) can be much more appealing to an appeal body than the bland, legalistic assertions of faceless civil servants, or even, dare we say, the silver-tongued persuasiveness of slick tax advisers. Long may this option be open to all!