It is said that only death and taxes are certain. But not by anyone familiar with tax legislation. Writing for Tax Journal as part of his regular column, Victor Cramer explores the tension between two past cases, considered in a recent Upper Tribunal decision.

If you throw a rock into a room of tax advisers, you have an even chance of hitting someone who says it does or does not exist. A similar experiment with tax judges instead of tax advisers is not advised but it would probably yield similar results.

Neither experiment is recommended. Far better to consider the Upper Tribunal’s decision in KSM Henryk Zeman SP Z.o.o. v HMRC [2021] UKUT 182 (TCC) (KSM) (reported in Tax Journal, 2 September 2021). That decision seeks to resolve the tension between the cases of Oxfam v HMRC [2009] EWHC 3078 (Ch) and HMRC v Noor [2013] UKUT 71 (TCC).

In this case, KSM was established in Poland. It entered into a contract with another Polish firm to install a boiler in the UK. Neither was VAT registered in the UK. The supply exceeded the VAT registration threshold, so KSM applied to register for VAT in the UK. HMRC issued a questionnaire. Despite answering it carefully, the questions elicited inadequate information and HMRC incorrectly refused VAT registration. Confusion reigned, followed by a VAT assessment. KSM appealed, arguing it had a legitimate expectation arising from statements made by HMRC in the course of its initial attempt to register for VAT.

The FTT concluded that KSM had not acted reasonably. KSM elected not to challenge HMRC’s decision despite professional advice that it was wrong. Failure to appeal the refusal was not reasonable, and KSM was therefore not entitled to rely on HMRC’s statements.


There were two live issues in the Upper Tribunal (UT):

  1. If the FTT had jurisdiction to deal with legitimate expectation, was its conclusion correct?
  2. Did the tribunal have jurisdiction to deal with legitimate expectation?


The first issue was dealt with briefly. KSM did not have a legitimate expectation.

The second was not dealt with briefly, not least because of the volume and apparently contradictory nature of the judgments considered. See, for example, paras 41 and 43 which deal with Oxfam and Noor, respectively.

In seeking to reconcile the various decisions, the UT set out its understanding of the FTT’s jurisdiction (at para 69 onwards). The tribunal’s starting assumption should be that the taxpayer may rely on public law grounds unless the relevant legislation excludes them expressly or by inference. While the FTT does not have general supervisory jurisdiction, taxpayers may challenge the validity of certain decisions covered by VATA 1994 s 83. Whether it arises in any given case turns on the language of the legislation and the nature of HMRC’s act or discretion.

In this case, the assessment was made under VATA 1994 s 73(1). It is a ‘may’ provision, not a ‘shall’ provision. It involved HMRC discretion. Such decisions should generally be amenable to challenge on public law grounds. The appeal was made under s 83(1)(p), which did not on its face appear to oust the tribunal’s jurisdiction.

Where does this leave us? Arguably, the FTT has jurisdiction wherever HMRC has discretion. The UT’s analysis on this point is, however, obiter. The High Court in BT Plc v HMRC [2021] EWHC 1095 took a different view of VATA and implied ouster (albeit in a different context).

There will undoubtedly be further cases. Meanwhile, the dual approach of an appeal and a judicial review remain the safest course. And don’t throw rocks at judges.



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