No legitimate expectation

The taxpayers were employment bureaux companies that provided nurses and other medical staff on a temporary basis to hospitals and care homes. They charged clients an hourly rate which included a wage element and a commission element by way of agency fee. They accounted for VAT on the commission element only on the basis that they were acting as agents.

HMRC later raised VAT assessments seeking additional VAT on the basis the companies were in fact acting as principals so that VAT was due on the entire charge made to clients. The taxpayers agreed this was the case. However in light of a letter HMRC sent to Delta in 2004 which confirmed it was correct to account for VAT on the commission element the taxpayers sought judicial review of HMRC’s decision to assess additional VAT saying they had legitimate expectation to be treated...