TC09596 - [2025] UKFTT 00895 (TC)

Fecha: 16-May-2025

Discussion

Discussion

71.

The Appellant appeals against Assessments (to VAT), which were raised to recover under-declared output tax. The Appellant had accounted for VAT on the premise that it makes supplies of goods, comprising flooring and beds, and that the supplies of fitting services (which are provided by the fitters and are paid for directly by the customers) are supplies made by the fitter concerned to the customer concerned.

72.

On the ‘Supply Issue’, Mr Jones submits that the economic and commercial reality is that:

(1)

the fitters who undertake the fitting work for the customers are independent and self-employed. They do not work for the Appellant and the Appellant has no obligation to pay them for their work.

(2)

the fitting work is done by the fitters on their own account, and the fitters are liable for its quality.

(3)

Customers pay the fitters on completion of the job,with that payment covering any additional surcharge or further charge for work done on site by the fitter, over and above the estimated fitting charge.

(4)

the Appellant takes no economic benefit and is not privy to any arrangements entered into between the customer and the fitter.

73.

HMRC determined that the Appellant had incorrectly treated the supply of carpet fitting as being made directly to customers by self-employed fitters. In this respect, Miss McArdle submits that where a supply of carpet fitting was made, the fitters - effectively and as a matter of economic and commercial reality - acted as ‘subcontractors’ for the Appellant. She adds that HMRC further understood the Appellant’s case to be that a relationship of ‘principal’ and ‘agent’ was being argued, in respect of the Appellant’s relationship with the carpet fitters.

74.

On the ‘Legitimate Expectation Issue’, Mr Jones submits that it was unfair for HMRC to assess in respect of periods falling prior to 6 July 2021, effectively reneging on what Officer Hothi said in his letter of that date; and that it was unfair for HMRC to assess in respect of periods falling between 6 July 2021 (being the date of Officer Hothi’s letter) and 14 December 2021 (being the date of HMRC informing Mr Sweeting that they might assess in respect of past periods)in circumstances where:

(1)

Based on the 6 July 2021 letter, the Appellant was taking HMRC’s position to be that any change following HMRC’s review would only take effect from the date they clarified their position;

(2)

HMRC knew that because Mr Sweeting told them in his email of 6 July 2021 and his letter of 13 July 2021, yet HMRC failed to correct that understanding despite having opportunities to do so; and

(3)

In reliance on its understanding of HMRC’s position, the Appellant continued to account for VAT based on that understanding.

75.

Miss McArdle however submits that at no time did HMRC state that:

(1)

the Appellant was correct to treat the supplies of fitting services as having been made by third-party contractors;

(2)

they were satisfied that the Appellant had not under declared output tax in the VAT periods in question;

(3)

they had decided not to raise assessments for the periods in question;

(4)

the Appellant should continue to declare VAT on the basis that it was not supplying fitting services.

76.

In further amplification of these submissions, she states that the burden remained on the Appellants to apply the correct VAT treatment, and that HMRC were considering the position more widely. She further states that at no time was the Appellant promised, let alone unambiguously, that output tax would not be assessed.

77.

We proceed by considering the Supply Issue first. The point at issue is the direction of the supply of the fitting service. The question posed is whether the Appellant made a supply of fitting so as to become subject to an obligation to account for VAT. This is not an analysis of what the customer thinks, but what is actually happening from a VAT perspective. It is helpful to set out the relevant principles of VAT, as established by the authorities, before applying the principles to the facts.