Philippa Whipple QC and Andrea Lindsay Strugo have secured an important public law win for a taxpayer against HMRC.
GSTS is a limited liability partnership which supplies pathology services to NHS hospitals as well as other NHS and public sector bodies. It was established in reliance on a ruling given by HMRC in 2008 that its pathology supplies would be taxable, which was necessary if GSTS was to recover the substantial input tax it incurred on seconded staff and other purchases. In January 2013, HMRC withdrew the 2008 Ruling, decided that the supplies of pathology services were exempt from VAT, and offered GSTS just three months to make necessary adaptations. The Administrative Court rejected HMRC’s case that three months was reasonable. By way of an interim injunction, HMRC was ordered to continue to treat GSTS’ supplies as taxable at least until a tax tribunal had ruled on the liability of the pathology supplies. The Court held that if GSTS loses in the tax tribunal, it will be entitled to further time to restructure, and left the door open for a future hearing on the issue of what precisely would be a reasonable period, in that event, if it could not be agreed. The tax tribunal will hear the case later this month.
This is a very important judgment. The Court accepted that a taxpayer’s legitimate expectation of particular tax treatment could extend to the future (and in this case did extend to the future), and was not limited to a prohibition on collecting tax for the past.
Judgment can be found here