UT/2024/000070 - [2025] UKUT 00210 (TCC)

As noted below under Ground 5, Mr Southern argued in oral submissions that he was not challenging the EU law conformity of VAT Notice 725. If that is correct, then given that Notice 725, as the FTT correctly observed, contains a clear bar on accepting information produced after three months, it is difficult to reconcile the lack of challenge to the terms of VAT Notice 725 with the Appellant’s argument that evidence obtained outside of the time limit should nevertheless have been admitted. It is inconsistent for the Appellant to maintain, on the one hand, that there is no challenge to Notice 725, and on the other, that evidence falling outside the three-month period should have been accepted.

We have no hesitation in rejecting the Appellant’s argument that evidence which is obtained more than 3 months after the time of supply may be considered. Paragraph 4.3 specifies, with the force of law, that the trader must “obtain and keep valid commercial evidence that the goods have been removed from the UK with the time limits set out at paragraph 4.4”. Paragraph which 4.4 also has the force of law specifies the relevant time limit as three months.

To the extent that the Appellant maintains, despite Mr Southern’s oral submissions, that there is an inconsistency between Notice 725 and EU law, we will address that argument separately below under Ground 5.

If the Appellant’s position is that there is a distinction between the sufficiency of evidence (subject to a time limit) and the fact of removal (which is not), then that is ultimately an argument about how the issue should be framed. We have already explained above why we disagree with the Appellant’s characterisation of the issue under Ground 2.

Subsequent paragraphs of VAT Notice 725 (16.12-16.13 – set out at [14] above) make clear that, if the trader does not have the necessary evidence within that period, VAT must be accounted for, and any adjustment must be made later, with interest payable for the intervening period. This approach is consistent with the reasoning in HMCE v Musashi Autoparts Europe Ltd [2003] EWCA Civ 1738. The issue in that case concerned whether the taxpayer remained liable to interest on an amount of VAT assessed by HMCE. That assessment arose because the taxpayer had not been entitled to zero rate their supplies, HMCE having considered the taxpayer did not hold sufficient evidence goods had been removed. The taxpayer had then provided evidence outside the time limit specified in the VAT Notice which HMCE did accept. The trader adjusted its VAT account in the period when the further evidence was received such that the amount of VAT due under the assessment ceased to be due. However, HMCE maintained their assessment in respect of interest which the taxpayer then challenged, succeeding at first instance but losing on the issue before the High Court and then the Court of Appeal.

We consider the Appellant’s reliance on Musashi (to support its position that the VAT Notice do does not prohibit the submission of supplementary evidence after three months to justify zero-rating) is misplaced. While it is true that the Court of Appeal in Musashi, when considering the timing of interest, contemplated that evidence might be produced outside the three-month period, it then went on to explain the effect of that as follows at [47]:

“The scheme of the Act and the regulations, read with Notice 703 [this contained similar conditions regarding the 3 month time limit and subsequent adjustment upon receipt of evidence outside of that time limit], is that the obligation to account in one VAT accounting period (when the conditions are not met) on the basis that VAT was payable in respect of the supply is matched by a reduction in the amount of VAT payable in a subsequent accounting period (when the conditions are met).”

Accordingly, if the trader does not have sufficient evidence within three months, they must report the supply as standard-rated. If evidence is later obtained, it may justify an adjustment, but only in the later period. The trader cannot use that evidence to revisit the earlier period. That is reflected in the guidance given at paragraphs 16.12-16.13 of the VAT Notice 725.

Mr Southern suggested that Musashi was distinguishable because, in that case, it was common ground that the time limits had not been met, whereas here that was not accepted. We do not see how that undermines the relevance of the reasoning on which the Court’s conclusion was based. The point remains that, to the extent evidence obtained outside the three-month period could be taken account of, its effect was only the later period, and not the period in which the transaction occurred (as would have been the case if the evidence had been obtained within 3 months).

We therefore find that the FTT was correct to exclude the evidence, given it was obtained outside the three-month time limit, in accordance with the requirements of VAT Notice 725.

In any event, even if we are wrong on that point, the FTT did consider the evidence but concluded that it would not have made a difference. At [140], the FTT found that the boarding cards could not be matched to the consignments in question and pointed out a number of issues with Mr Browning’s attempts to marry up the cards to the loads. None of the reference numbers, nor lead names matched with the other documents, the number which had been assumed to be a vehicle registration did not contain the required digits and format for a UK registration and did not in any case match to the vehicle registrations on the weighbridge tickets. Nor did the format match to Belgian vehicle or trailer registration numbers. The evidence was that the date and month and time (no year was given) referred to the time of booking and not to any particular ferry departure. At [141] the FTT also explained how Mr Browning’s matching assumptions based on weight could not have been determinative given the standard weight load and the standard tare P&O assumed.

There was thus ample support for the FTT to conclude that the boarding cards did not constitute sufficient evidence, whether themselves or in combination with the other evidence.

The Appellant also argues, referring to [121] and [122], that the FTT was wrong to treat paragraph 4.4 of VAT Notice 725 as a strict rule of law while also suggesting that HMRC could, if it chose, dispense with that requirement.

HMRC maintains that VAT Notice 725 applied and was correctly relied upon. It explains that the FTT’s reasoning in those paragraphs was directed at the Appellant’s proportionality argument and not at any power to waive the requirements of paragraph 4.4.

We agree with HMRC that there is no merit in this point. The Appellant has misinterpreted the FTT’s reasoning.

It is helpful in our view to separate out the three distinct questions of timing to see this: (1) When did the evidence come into existence? (2) When did the trader obtain the evidence? and (3) When did the trader provide that evidence to HMRC?

Before the FTT, the Appellant sought to argue that question (2), the date of obtaining the evidence, could fall outside the three-month period. The FTT rejected that argument. At [121] and [122], the FTT was not suggesting that HMRC could choose to accept evidence obtained outside the three-month period. Rather, it was addressing the Appellant’s argument that HMRC’s refusal to accept evidence obtained within the three months but provided much later (18 to 30 months) was disproportionate. The FTT found that it was not.

We therefore reject this ground of appeal.