VAT updates: November 2022

Peninsula Blog

November 03 2022

Burden of proof for a personal liability notice

The Upper Tribunal has allowed HMRC’s appeal relating to burden of proof where a personal liability notice is concerned, in Zaman (UKUT 00252).

Put simply, the First Tier Tribunal had held that the burden of proof lay with HMRC in a case relating to a personal liability notice. The Upper Tribunal decided that this was an error in law in regard to the exact way in which it was applied.

Mr Zaman had argued that the assessment to tax on his company was, itself, incorrect, and accordingly he could have no personal liability. This is not the same as having a separate reason for having no personal liability.

The Upper Tribunal accepted HMRC’s argument that the burden of proof in regard to the validity of the assessment lay with the taxpayer. It followed that a defence based upon the invalidity of the assessment transferred the burden of proof to the person on whom the personal liability notice was served.

Financial exemption and HMRC guidance

Intelligent Money Limited (TC08595) indicates the extent to which reliance on HMRC’s manuals is misguided.  HMRC consistently repudiates the contents of its guidance.

The appellant had based its view (that its SIPP management fees were exempt under the insurance exemption) on the contents of HMRC’s manuals. However, HMRC’s case against them did not follow the views expressed in the manuals, and it was on those additional points that the appellant failed, and HMRC won.

The judge commented: ‘However, and by way of postscript, the Tribunal notes that by reference to HMRC’s guidance in this area the appellant’s case had clear merit. By reference to the case prosecuted by HMRC their guidance is outdated and misleading and should be amended without delay.’


The years go by, but the apparent insanity of VAT cases relating to food never abates.

The case of Innovative Bites Limited (TC08605) has concluded that giant marshmallows are not confectionery, and therefore are zero rated, whereas regular sized marshmallows must be taxed as confectionery.

The super-sized marshmallows have exactly the same ingredients, texture, and overall shape as their smaller brethren, but are held out as being especially suitable for campfire roasting on sticks, and inclusion in an American style recipe where they are combined with layers of chocolate. But they also can be eaten straight out of the packet in the same way as the smaller kind of product.

The taxpayer put much emphasis on the fact that these were suitable for campfire roasting on sticks, and incorporation into American recipes, which we were told could not credibly apply to the regular sized marshmallows.

This last point will confuse readers of a certain age, who used to put regular marshmallows on sticks and put them into fires to produce precisely the same outcome. We now find that those products were essentially unsuitable for that very traditional application.

The apparent relevance of incorporation into foreign recipes will no doubt give rise to the flowing of creative juices on the part of many manufacturers of confectionery.

It seems unlikely that HMRC will refrain from appealing.


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