Earlier this year, Capital Cranfield, independent trustee of the Kenrick and Jefferson scheme, won a VAT tribunal challenging HM Revenue & Custom’s (HMRC) policy on not allowing schemes in wind-up to offset the 17.5% tax, which would have formerly been offset by the scheme employer.
The tribunal agreed that the trustee of this scheme should be able to reclaim VAT, but now HMRC are refusing to allow the case to be used as a precedent for similar challenges.
Patrick O’Brien, press officer for HMRC, said: “Tribunal decisions are specific to individual cases only, as it is only facts relating to that case that are heard. Therefore, the ruling by the tribunal applies only to Capital Cranfield, although we will consider whether any policy changes are necessary.”
Katherine Dandy, partner and head of dispute resolution at Sackers, who helped Capital Cranfield win the original tribunal, responded: “Are they really saying that if an identical challenge from a different trustee came forward, the trustee would have to build an entirely new case? There’s no reason why the principles [of the Kendrick and Jefferson case] shouldn’t apply.”
She added the tribunal decision could open the door for trustees in a similar position.
“VAT legislation cannot cope with trust law,” Dandy continued. “They’re not compatible, and because HMRC can’t put it in a box, they refuse to address it.”
Gavin Moffat, senior technical director at SBJ Benefit Consultants, said: “The question now is, how many cases will HMRC need before they accept the policies need to change? Independent trustees will feel obliged to lodge their complaint to a tribunal.”
Capital Cranfield claims it has a number of clients this issue could apply to and is currently considering its options.
