The Supreme Court has dismissed HMRC’s appeal in a long running case between the BPP Group of companies (who provide professional and academic education) and HMRC. The case initially centred on the VAT liability of supplies of books and education by BPP. BPP had a corporate restructure in 2006 and began to use one company to supply the books (BPP University College of Professional Studies Ltd) and another company (BPP University College of Professional Studies Ltd) to supply education. BPP argued there were two separate supplies, that of zero-rated books and standard-rated education. HMRC disagreed and argued that the supplies should be treated as one standard-rated supply and issued two VAT assessments. In May 2013, BPP appealed this decision to the First-Tier Tribunal.
What followed was a number of procedural delays by HMRC. HMRC applied for an extension of time, which BPP did not oppose. Disclosure was ordered for 17 December 2013 and HMRC provided it a few days late. A further deadline of 31 January 2014 was set for HMRC to provide information with the warning that if they failed to do so they faced being barred from taking further part in the proceedings. Whilst HMRC did serve a response on 31 January, BPP argued that the response did not provide the requested information and applied for an order barring HMRC from taking further part in the proceedings. This order was granted by the First-Tier Tribunal. HMRC appealed to the Upper Tribunal who reversed this decision. BPP then appealed to the Court of Appeal who restored the First-Tier Tribunals initial decision.
The Court of Appeal decision was appealed to the Supreme Court to make a final ruling. The Supreme Court agreed with the First-Tier Tribunal Judge that this decision involved two unpalatable choices. Making the debarring order, which she described as draconian, or not making the order, which, to use the vernacular, would have meant that HMRC effectively would have got away with it. In this case HMRC’s reticence in supplying information within the requested timeframe has meant the loss of an important case.
This case may have significant ramifications in other situations where HMRC is reticent in meeting deadlines set by the courts and we may see an increase in applications for barring orders.