Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - October 2000 to March 2001 - Case No. C.1733/00
Selected Cases and Summaries of Completed Investigations - October 2000 to March 2001
Volume 4 - 2nd REPORT - SESSION 2001-2002
Chapter 2
HM CUSTOMS AND EXCISE
Case No: C.1733/99
Delays in resolving a trader’s challenge to VAT policy on supplies to people with dyslexia.
Dr B was the managing director of company X. In November 1997, following a visit by a VAT officer to inspect the company’s records, Customs told Dr B that company X’s supplies of a computer application to people with dyslexia was being wrongly zero-rated as Customs did not classify dyslexia as a handicap for the purposes of VAT relief. Dr B challenged that view, saying that the Department for Education and Employment classified dyslexia as a handicap. Customs said that they based their policy on a decision by a VAT tribunal in 1994 relating to an appeal brought by the Dyslexia Institute.
In February 1998 Customs decided to review the matter and sought advice from the Department of Health. That Department’s eventual reply in June was inconclusive but they suggested Customs approach the Department for Education and Employment, which they did. On 5 August Customs told Dr B that it remained their policy that persons with dyslexia were not considered handicapped for VAT purposes and on 30 October they issued an assessment to company X for VAT of £56,896.00 plus interest.
On 5 May 1999 Customs told Dr B that they had received advice from the Department for Education and Employment which suggested that dyslexia might be treated as a handicap. However, in order to qualify for zero-rating the goods themselves would have to satisfy Customs’ criteria for relief. Following a meeting on 14 February 2000 Customs agreed to accept a statement of design intention from Dr B and on 1 March they withdrew the VAT assessment.
The Ombudsman found that Customs were responsible for serious delays in completing their policy review and then in withdrawing their VAT assessment. Customs agreed to offer Dr B a consolatory payment of £500 and to meet his reasonable costs in pursuing his case between June 1998 and March 2000.
Case No: C. 276 / 00
Alleged misdirection concerning the VAT registration of a trust and a claim to input tax
Mr A, the director of a company, complained that in December 1997 a VAT officer gave him wrong information over the telephone about the registration of a discretionary trust and about reclaiming input tax on the supply of a machine to be made by the trust. He also complained that the Adjudicator’s Office failed to explain how they had reached their findings on his complaint.
The Ombudsman found that Customs should have asked Mr A to put his query to them in writing and they should also have made a record of the substance of the call. That said, there was no evidence that the officer gave approval to Mr A’s scheme or that any “agreement” arose from their conversation. One month after Mr A’s enquiry, his solicitors sought a formal ruling on the VAT registration of the trust and Customs replied, correctly, that a one-off supply did not entitle the trust to register.
Mr A protested when Customs disallowed his company’s input tax claim and Customs offered to look at the matter again in April but Mr A failed to respond. However on 30 September Customs conceded that their initial telephone advice had been faulty and offered, exceptionally, to allow registration of the trust. On or after that date the solicitors were free to register the trust and issue a VAT invoice to the company.
Turning to Mr A’s complaint about the report by the Adjudicator’s Office, the Ombudsman understood why Mr A felt that they had taken a rather narrow view of his complaint but agreed with their conclusion that Customs had committed no serious mistake in their dealings with him. He concluded that Customs had provided poor oral advice to Mr A but had corrected their error when replying to his solicitors’ written query. They had admitted fault and had offered a remedy in the form of agreeing, exceptionally, to the trust’s registration. The Ombudsman considered that to be an appropriate outcome to a partly justified complaint.
Back to top
Previous < Contents > Next
|
