Weekly VAT News

Elphysic Limited & Ors: Mini-umbrella company fraud – UT

The Upper Tribunal has issued its decision in a case concerning mini-umbrella companies (MUCs), and their use of the VAT flat rate scheme (FRS) and employment allowance (EA). Thousands of other appeals are stayed pending the outcome of these lead cases. HMRC had deregistered the MUCs from VAT, issued assessments on the basis that they were not entitled to use the FRS, and denied their entitlement to use EA, on the grounds that the MUC scheme was fraudulent. The First-tier Tribunal held that although there were objective grounds for HMRC to conclude that the MUCs’ VAT numbers were being used for fraudulent purposes, HMRC could not prove that the MUC directors knew or should have known that the VAT registration was being used fraudulently. Consequently, HMRC could not deregister the MUCs. However, the FTT endorsed HMRC’s decision to deny the MUCs the benefit of the FRS and the EA. HMRC and the MUCs appealed the FTT decision. The UT has found there was no need for HMRC to establish that the MUC directors knew or should have known that they were facilitating a fraud to deregister the MUCs. That there were objective grounds for concluding that the VAT numbers would be used fraudulently was sufficient. The UT agreed with the FTT’s decision with respect to the use of the FRS and the EA. HMRC’s appeal was upheld, and the MUCs’ appeal was dismissed. (Contact: Adam Routledge)

Medpro Healthcare Limited & Anor: Application for a late appeal – UT

The First-tier Tribunal refused Medpro Healthcare Limited and Mr Ruprai (the Appellants) permission to bring appeals out of time against a penalty assessment and personal liability notices. The Appellants appealed against the FTT decision on four grounds. The first three essentially alleged a failure by the FTT to consider relevant matters and an absence of reasoning in the decision. The Upper Tribunal upheld the Appellants’ appeal on these grounds. The UT then turned to ground 4, which was “a narrow (but very significant) attack on the correctness of the Upper Tribunal decision in Katib” (and, in effect, Martland and subsequent UT decisions on late appeals), on the basis that the UT in Katib “improperly constrained the FTT’s discretion to extend time for out-of-time appeals”, by giving particular weight to certain factors when applying the Martland three-stage test. The Honourable Mr Justice Marcus Smith considered that the UT cannot direct the FTT, by way of binding guidance, as to what weight to place on particular factors when considering whether to extend time for an appeal, and would allow the appeal on ground 4. Judge Cannan, however, was “not convinced that Martland and Katib are wrong”; the UT is entitled to provide guidance to the FTT on the exercise of its discretion, including the weight to be attributed to certain factors. Judge Cannan would accordingly have dismissed the appeal on ground 4. As the judges were unable to agree, Marcus Smith J had the casting vote and the appeal on ground 4 was allowed. The appeal will be remitted to the FTT for re-hearing by a differently constituted tribunal. (Contact: Donna Huggard)

Customs technical handbooks

As part of the series of customs technical handbooks to update and consolidate their detailed customs guidance, HMRC have published a Temporary Admission Customs Technical Handbook. The handbook sets out HMRC’s guidance on the temporary admission procedure and details on its use, including applications, eligible goods and time limits. The handbook includes the new rules on temporary admission that were brought into effect by The Customs (Miscellaneous Amendments) Regulations 2025. Other handbooks recently published include one on Authorised Economic Operator and a number on special procedures, including authorised use (end-use), inward processing, and outward processing. The handbooks, which set out HMRC’s view of the law, do not override the law. (Contact: Jeffrie Mann)

The role of online platforms in the tax collection system

Our first thought piece in the series on challenges facing online platforms focuses on the ‘deemed reseller’ rules, in particular, on the lack of clear guidance published on what level of due diligence is sufficient, and how tax teams must work with related stakeholders to mitigate risk. Further articles in the series will be available on tax@hand. (Contact: Abi Briggs)

Weekly VAT News will now be taking a summer break for a few weeks –
the next issue will be published on 1 September 2025.