Corkteck Ltd v HM Revenue & Customs

A substantive legitimate expectation claim arising from an alleged tax assurance depends on the true facts found by the court. It is not determined by asking only whether the public authority acted irrationally in refusing to honour the alleged assurance.

Where a taxpayer relies on an informal representation about tax, the taxpayer ordinarily must disclose the full details of the transaction, identify the ruling sought, make clear that a fully considered ruling is requested, and explain the intended use of the ruling. The representation must be clear, unambiguous and unqualified, and reliance must be reasonable. A short telephone exchange with a general advice service will rarely satisfy those requirements.

Corkteck sought judicial review of an amended VAT assessment of £315,504, together with interest and a surcharge. It supplied beverages to Sintra, a non-EU company not registered for VAT in the EU, for delivery to Sintra’s VAT-registered customer in Poland.

Corkteck claimed that an HMRC National Advice Service agent had assured it by telephone that the supplies could be zero-rated if the Polish customer’s VAT details appeared on the invoice. HMRC disputed the assurance and maintained that Corkteck’s customer was Sintra, so the triangulation arrangements did not apply. The central issues were the factual content of the conversation and the requirements for a substantive legitimate expectation based on informal tax advice.

1. The claim was dismissed. The court found that the HMRC agent had not given the assurance alleged by Corkteck. The contemporaneous note, the agent’s training and the later correspondence supported the conclusion that the agent had directed Corkteck to the conditions in section 3 of Notice 725. Corkteck’s customer was Sintra, not the Polish delivery recipient, so condition 1 was not satisfied.
2. A substantive legitimate expectation claim depends on the true underlying facts as found by the court. It is not governed by a test of whether HMRC acted irrationally in refusing to honour an alleged assurance. The issues of abuse of power and unfairness are for the court to determine by applying legal standards: