TC09554 - [2025] UKFTT 00747 (TC)

The Appellant company was incorporated on 11 April 2022 and carries on a trade of the production of films.

It has been registered for VAT purposes since 15 July 2022.

Its VAT return for the quarter ended 31 March 2024 was due to be filed on 7 May 2024. It was filed on 3 May 2024. It showed a repayment to be payable by HMRC to the Appellant of £478,893.36.

The level of input tax that the Appellant sought was higher than usual because the Appellant had three films in production in that period.

The Appellant accepts that it is entirely reasonable for HMRC to want to check such repayment claims before paying them and therefore it was not surprised that HMRC chose to check the repayment claim made on the VAT return for the March 2024 quarter. The first questions were asked on 22 May 2024 and a meeting was arranged and the earliest available date for HMRC was 19 June 2024. The Appellant asked HMRC if an earlier meeting might be possible (for example, if another meeting arranged by HMRC was cancelled at short notice) but no such opportunity arose.

The Appellant has responded to HMRC’s questions completely and quickly. For example:

The Appellant (through its key personnel) feels that HMRC have not reciprocated in dealing with the case as promptly and is concerned that the investigation (and, from the Appellant’s perspective, the Appellant’s expected repayment) has been hampered by a combination of:

The Appellant made regular contact with HMRC (on 10 July, 18 July, 24 July and 2 August 2024) to ensure that any further questions that arose could be quickly addressed by the Appellant. On 7 August, the Appellant was told that the investigating officer was going on holiday for two weeks after 13 August but that he was hoping to have his investigation resolved by then. The officer also explained that the delay in the Appellant’s repayment was due to an industry-wide investigation because of a few bad players in the film industry.

On 13 August 2024, the Appellant wrote to the investigating officer to ask for an update before his holiday. At 6.10pm on 13 August, however, the officer sent the Appellant a further two queries which appeared to the Appellant to be irrelevant to the investigation being carried out into the Appellant’s repayment claim. Those additional questions were answered in good time but nothing was able to be done by HMRC because the officer was now away.

In the meantime, the Appellant’s VAT return for the quarter ended 30 June 2024 showed a net VAT liability of £225,639.93. This was due for payment on 7 August 2024.

There was no agreement reached with HMRC for a deferral of the VAT due and (as explained below) no payment was made until more than 30 days after 7 August.

Until 7 August, the Appellant had every expectation that the repayment would be made in good time to allow its subsequent VAT bill (which was less than half the amount awaited from HMRC) to be paid. Between 7 August and 13 August, the Appellant had every expectation that the repayment would be agreed before the officer went on holiday.

In the course of the Appellant’s written correspondence with HMRC on several occasions, as well as at the 19 June meeting, the Appellant stressed to HMRC the damage to the Appellant’s cashflow and its reputation with its suppliers that the delay in the VAT repayment was causing.

On 2 September 2024, the Appellant made a formal complaint about the nature of the investigation. The Appellant did not appreciate at the time that this complaint was not the same thing as a formal request for deferral of the VAT for the June 2024 quarter which had fallen due for payment on 7 August 2024.

On 13 September 2024 HMRC sent a query seeking clarification of the language being used in contracts that the Appellant had sent to HMRC on 17 June 2024. Again, the Appellant felt that HMRC’s query was irrelevant to their investigation. At this stage, the Appellant’s request for an interim payment was refused.

Eventually, the £478,893.36, first claimed by the Appellant in early May, was repaid by HMRC more than six months later, on 8 November 2024. Some of that repayment was set off against the Appellant’s now outstanding VAT liability for the quarter ended 30 June 2024. The balance was repaid to the company on 20 November 2024.

The summer of 2024 was a particularly intense period of time for the company with three different films in production. Mr Golding, who is the Appellant’s accountant, likened it to the January tax return season in an accountancy practice. Mr Golding also noted that, even though HMRC’s checking procedures before making repayments had tightened in recent years, the delays suffered by the company were in his mind of a different scale. The cashflow difficulties being caused by the delayed repayment had an adverse impact on the Appellant’s commercial activities.

On 11 September 2024, HMRC issued a penalty assessment of £9,025.59. (Footnote: ²) This was notified to the Appellant which then appealed against the penalty to the Tribunal on 19 September 2024.

The VAT was eventually paid in two instalments. The first (£82,331.30) on 4 October 2024 was by set-off of a repayment due to the Appellant in relation to its VAT return for the quarter ended 30 September 2024. The balance (£143,308.63) on 8 November 2024 was by set-off of the repayment due to the Appellant in relation to its VAT return for the quarter ended 31 March 2024.