Sampling and Disclosure Case Management Decisions

In an interesting case regarding evidence sampling and disclosure, the First-tier tribunal decided that it is fundamental to natural justice (in cases involving multiple transactions such as Kittel cases) that an Appellant should be entitled to see all the evidence which HMRC have relied on in constructing their case.  

The FTT agreed that sampling may well be an appropriate way to proceed for the purposes of the ultimate hearing, but that is a matter to be resolved at a later stage, once the full evidence upon which HMRC rely has been disclosed to the Appellants.

In this case (here), HMRC had proposed to limit the provision of evidence to a sample of 50 labour suppliers (described as mini umbrella companies) out of a total of 1,520. 

Additionally, the FTT found that there was no reason why it should be appropriate, simply because HMRC have alleged dishonesty on the part of the Appellants, that they should be entitled to heightened disclosure to match the heightened disclosure which HMRC accepted they must themselves provide.

This judgement follows on from a similar judgement (here).

Aspire comment

It is hoped that HMRC will now think again before proposing a sample-based approach to Kittel type investigations in order to prove its case rather than presenting the full extent of evidence upon which it seeks to rely, which would enable the taxpayer to prepare a full defence.

It is also important to note that heightened disclosure is a one-way street when dishonesty is alleged.  This means that HMRC must disclose all evidence to the Appellant even if that evidence supports the Appellants case.      

We have also recently seen Kittel assessments reduced significantly when challenged on the basis of “best judgement”.    

Contact us if;

• Your VAT Registration Number has been cancelled (using the Ablessio principle),
• You have been denied a VAT input tax credit (using the Kittel principle),
• You have received a penalty assessment under S69C VAT Act 1994,
• You have received a request from HMRC to make representations in advance of a transfer of a corporate penalty under S69D VAT Act 1994, or
• You have received a Penalty Notice under S69D VAT Act 1994.