The judgment means that HM Revenue & Customs may have to disclose more information to its opposition in VAT tribunals, even if it is to the detriment of the taxman’s case.

VAT Tribunal chairman Colin Bishopp, in the case of Calltell v HMRC, found that even in complex carousel fraud cases, where the taxman usually has to contend with masses of information, it should still disclose documents relevant to its case.

Calltell had previously failed in its bid to claim several million pounds in input tax, as the commissioners had previously said that the company was aware that carousel fraud was, or was likely, to be committed.

The appeal also failed, but Bishopp said it was ‘not sufficient’ for the taxman to produce the bare minimum of information for appellants.

He called on HMRC to list the documents upon which they will rely on. ‘The documents so disclosed should encompass most of those which are likely to be of relevance,’ said Bishopp.The judgment follows the recent O’Connor Report, which found that HMRC had begun to improve in its document disclosure regime for criminal cases.

‘They would hold information [back], particularly when they had given advice to a business one year, and then different advice the next,’ says Andy Lynch, senior consultant at tax firm Chiltern.

‘Since Calltell it seems that there is a marked improvement in the amount of material that HMRC is disclosing.’ Lynch believes it ‘remains to be seen’ whether HMRC could disclose even more information.

He also warns advisers to think carefully about calling on the taxman to make substantial disclosures. ‘Be careful what you ask for, it might not be in the client’s favour.’ If HMRC fails to disclose what is requested, then Lynch says advisers should make it clear to the tribunal.

Nevertheless, advisers believe the changes will see a major shift in tribunal policy.
They argue that Bishopp has in effect suggested that HMRC should provide appellants information maintained by civil investigators.