- A recent High Court decision in the Realreed case has shown that businesses cannot assume that an uneventful HMRC inspection means they are free from unexpected VAT bills.
- Realreed, a property company that had treated its serviced accommodation lets as exempt from VAT for nearly 30 years, was assessed for £4.8m by HMRC for VAT that it believed should have been accounted for over the previous four years.
- Realreed argued that it had a ‘legitimate expectation’ that its position was correct due to HMRC’s conduct during previous inspections, but the High Court upheld HMRC’s right to assess in these circumstances.
- The case highlights the importance of keeping VAT strategies under review and seeking a formal ruling from HMRC on difficult and risky issues.
Source RSM
