Nottingham Forest Football Club Limited v The Commissioners for HMRC

For the one-year limit in section 73(6)(b) of the VAT Act 1994, HMRC must have actual knowledge of the contents of evidence sufficient, in its opinion, to justify the assessment. Constructive knowledge, or mere availability of material, is insufficient.

The taxpayer bears the legal burden of showing that an assessment was made out of time. It must therefore establish that HMRC had the necessary evidence more than one year before the assessment. An evidential burden may shift where the taxpayer first makes a prima facie case. Where the evidence does not establish whether later-obtained material contributed to the assessing officer’s knowledge, the taxpayer has not discharged that burden.

Nottingham Forest Football Club Limited appealed a VAT assessment of £345,561 for the accounting period 08/15. The assessment was made on 29 April 2019.

The First-tier Tribunal dismissed its appeal in [2022] UKFTT 305 (TC). It held that the club had not proved that HMRC possessed evidence sufficient to justify the assessment before 9 May 2018, rather than when Navision data had been supplied on 20 April 2018.

Before the Upper Tribunal, the club challenged the legal test, the allocation of the burden of proof, and the alleged perversity of the First-tier Tribunal’s conclusion. The central issue was whether the assessment was time-barred by section 73(6)(b) of the VAT Act 1994.

1. Appeal dismissed. The First-tier Tribunal made no error of law in dismissing the challenge to the VAT assessment.

2. The governing inquiry under section 73(6)(b) of the VAT Act 1994 requires identification of the facts which, in the assessing officer’s opinion, justified the assessment, and the date on which the last evidence of sufficient weight concerning those facts came to HMRC’s actual knowledge. The officer must know what the evidence reveals; constructive knowledge and material merely made available do not suffice.

3. The First-tier Tribunal had correctly identified that legal framework. It could not determine whether the Sage data obtained on 9 May 2018 added to the Navision data obtained on 20 April 2018 because neither party supplied evidence establishing the respective contents or relevance of the two data sets. Its references to the possible relevance of the Sage data did not substitute a lower legal test.

4. The taxpayer bears the legal burden of proving that an assessment is outside the time limit. Although the burden proposition in Pegasus Birds Ltd v C & E Commissioners was assumed rather than decided, the Court of Appeal’s acceptance of the proposition in Lithuanian Beer Ltd v HMRC was binding. The allocation also accords with principle: the taxpayer will generally know what evidence it supplied and when. A prima facie case may shift an evidential burden to HMRC, but the club had not made one.

5. The First-tier Tribunal did not positively find that HMRC first had sufficient evidence on 9 May 2018. It found only that the club had not proved that HMRC had sufficient knowledge by 20 April 2018. There was therefore no unsupported factual finding capable of challenge under Edwards v Bairstow.

• Upper Tribunal (Tax and Chancery Chamber): dismissed the taxpayer’s appeal.
• First-tier Tribunal (Tax Chamber): dismissed the taxpayer’s appeal against the VAT assessment: [2022] UKFTT 305 (TC).