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Avicenna Centre for Chinese Medicine Ltd (TC4820)
Interest due as a result of official error
The company supplied Chinese herbal teas and accounted for output tax on its sales until 2014. HMRC accepted that the supplies should have been zero rated. It refunded the output tax that the taxpayer had overpaid but the company claimed interest on the basis that HMRC had given an incorrect ruling that the supplies were standard rated (VATA 1994 s 78(1)(a)).
The First-tier Tribunal said the onus was on the taxpayer to show that it had overpaid output tax as a result of incorrect advice given by HMRC. The taxpayer referred to three occasions when the department had given it incorrect information:
- correspondence with HMRC in 1994 when it said the supplies should be zero rated;
- a VAT compliance visit in 2004 during which the officer confirmed the standard rate was being correctly applied;...
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