D Jacobson and Sons Ltd v Revenue and Customs (VAT - ADMINISTRATION : Bad debt relief) [2016] UKFTT 530 (TC) (26 July 2016)

D Jacobson and Sons Ltd v Revenue and Customs (VAT - ADMINISTRATION : Bad debt relief) [2016] UKFTT 530 (TC) (26 July 2016)

The Tribunal held that the letters of comfort and interest write-offs were not contractual guarantees and did not constitute consideration for the supplies to FFL. There was no direct link or reciprocity between the supply and the write-offs, and no payment was received by the Appellant for VAT purposes. Therefore, the Appellant was entitled to retain the VAT bad debt relief and was not required to repay it.

Citation
[2016] UKFTT 530
Parties
Appellant: D Jacobson & Sons Ltd; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
26 July 2016
Procedural Posture
VAT ADMINISTRATION : Bad Debt Relief / First Tier Tribunal (tax) Appeal
Outcome
Appeal allowed
Legal Topics
VAT Bad Debt Relief, Consideration for Supply, Guarantee and Letters of Comfort, Fiscal Neutrality, Corporate Veil
Tax Law Contract Law European Union Law VAT Bad Debt Relief Consideration for Supply Guarantee and Letters of Comfort Fiscal Neutrality Corporate Veil

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 5 Authorities cited 14 Party arguments 2 Amounts and remedies 6
Sign in to unlock

Parties

D Jacobson & Sons Ltd

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

VAT ADMINISTRATION : Bad Debt Relief / First Tier Tribunal (tax) Appeal

Legal Issues

  1. 1 Whether undertakings in letters of comfort constitute payment of consideration against a contract debt for VAT purposes
  2. 2 Whether HMRC was correct to require repayment of previously refunded VAT bad debt relief

Ratio Decidendi

The Tribunal held that the letters of comfort and interest write-offs were not contractual guarantees and did not constitute consideration for the supplies to FFL. There was no direct link or reciprocity between the supply and the write-offs, and no payment was received by the Appellant for VAT purposes. Therefore, the Appellant was entitled to retain the VAT bad debt relief and was not required to repay it.

Court Disposition

Appeal allowed

Orders

  • The assessment requiring repayment of £570,824 VAT bad debt relief is set aside.