Holiday Booking Management Limited v The Commissioners for HMRC [2026] UKFTT 587 (TC)

[2026] UKFTT 00587 (TC)Case No TC 09847
FIRST-TIER TRIBUNAL
TAX CHAMBER
Date Judgment date: 15 April 2026
Between
HOLIDAY BOOKING MANAGEMENT LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent
Location: Decided on the papers
Appeal reference: TC/2025/03293
Strike out application - refused
Decided by:
TRIBUNAL JUDGE SARAH ALLATT
The Tribunal determined the application on 13 April 2026 without a hearing under the provisions of Rule 29 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, both parties having consented to the application being decided without a hearing.The papers considered by the Tribunal were the Application for a Strike Out made by HMRC on 24 October 2025, the response from the Appellant on 25 November 2025, HMRC’s further response on 29 December 2025, the decision notice and the review conclusion letter.DECISION

Introduction

[1]The underlying appeal is against a decision letter, dated 26 February 2025, adjusting a VAT credit.[2]The application is made by HMRC for a strike out of the Appellant’s appeal under Tribunal Rule 8(3)(c), on the basis that there is no reasonable prospect of the Appellant’s case succeeding.

background

[3]The VAT period in question is the period 1 April 2021 to 30 September 2021.[4]The VAT return submitted by the Appellant showed a credit of VAT due to them of £196,879.50.[5]As part of a pre-repayment credibility check, HMRC reviewed this amount and adjusted the credit to £9,908.50.[6]They communicated this to the Appellant in a letter on 26 February 2025, relevant extracts of which are shown below: We believe that there is an inaccuracy in this return. This means that the amount of VAT claimed for the period 1 April 2021 to 30 September 2021 is wrong. The inaccuracy we have found is shown below. Details of the inaccuracy Output Tax Credits were claimed on supplies that had not been previously declared by the company on the VAT return. The table below shows which boxes of your return contain the inaccuracy. It also shows the:  amounts that you have declared  the adjusted amounts that your return would have shown if it had not contained this inaccuracy This decision is based only on the checks we have made. .... What happens next As a result of our check, you are entitled to a VAT credit of ￡9,908.50 for this period under section 25(3) of the VAT Act 1994. We’ll credit this amount to your account. ..... What to do if you disagree We’re now offering you a review of our decision. You can (either):• accept our offer of a review• appeal to an independent tribunal If you want to do either of these, you must do so within 30 days of the date of this letter. If you appeal to a tribunal, you can’t accept our offer of a review. Most disputes can be resolved by a review, without the need to appeal to a tribunal. You may find that a review is quicker and costs you less than appealing to a tribunal. We won’t take any action to collect any amount you don’t agree with during a review. But we may charge interest on any amount the review or tribunal says is due.[7]The Appellant asked for a review of this and other matters. In relation to this matter, the review letter said: My conclusion is that the decisions to disallow input tax for period 09/21 notified on 26 February 2025, and raise assessments for periods 12/21, 03/22 and 12/22 notified on 25 March 2025, are as detailed below: The decision to deny a VAT credit of £186,971.00, for period 09/21, made under section 25(3) of the VATA94 is upheld. .... The first decision gives effect to Officer Greene’s conclusion that £186,971.00 of your 09/21 period input tax claim is disallowed. As a result, your VAT credit has been adjusted from £196,879.50 to £9,908.50. This is based on the determination that you adjusted for output tax credits in Box 4 of the return, on supplies that had not been previously declared in your VAT returns. Please note that I have summarised the information gathered throughout the enquiry, I have not included a full timeline of the dates and individual correspondence. The information below outlines what has led to the decision in dispute. You submitted your 09/21 period VAT return on 1 October 2021 claiming £196,879.50 repayment. This was queried under a pre-credibility check as it was your company’s first VAT return covering a 6-month period from 1 April 2021 to 31 September 2021. Throughout the enquiry, you and your representative responded to queries from Officer Greene and provided information to support your claim. Questions were raised regarding the relationship between your company, Freedom Travel Group Ltd, World Travellers Ltd, and The MidCounties Cooperative Ltd - specifically in relation to invoices linked to branch codes 242, 253, 281 and 1534, as it was unclear which entity these supplies related to. On 19 June 2023, Officer Greene issued a pre-assessment calculation along with correspondence outlining HMRC’s position: that the transactions recorded under branch codes 242, 253, and 1534, in your VAT account would be disallowed unless evidence was provided to demonstrate that these transactions related to taxable supplies made by your company, and not by World Travellers Ltd. The information currently held does not support that the supplies for which you are seeking to make the adjustment were made by yourself. As such, you are not entitled to make an adjustment for sales you have not declared. You responded on 7 July 2023, stating that you did not agree with HMRC’s position. Following this, Officer Greene granted multiple extensions to allow your representative additional time to submit further information and to agree to the pre-assessment figures calculated. By letter on 27 February 2025, Officer Greene notified you of her decision in question to reduce VAT repayment claim for 09/21 from £196,879.50 to £9,908.50 due to claiming ‘output tax credits’ on supplies that had not been made by the company. By letter on 25 March 2025, Officer Greene notified you of the decision to raise assessments for periods 12/21, 03/22, and 12/22 totalling £40,973.00. A review request concerning the first decision was received from your representative, MHA, on 28 March 2025. A further review request was received concerning the second decision from your representative, MHA, on 23 April 2025. What I have considered in my review Were the assessments raised in time (09/21 period) It is important to note that where a person submits a VAT return which shows an input tax entitlement greater than the output tax liability, and HMRC deny or make an adjustment to the repayment shown on that return, that is not done by way of, or as the result of, an assessment. The original 09/21 period VAT credit claim of £196,879.50 has been adjusted under section 25(3) of the VATA94 and does not constitute as an assessment under section 73 of the VATA94; it is an adjustment to a VAT credit. In these instances, HMRC are entitled to withhold repayment while conducting reasonable and proportionate enquiries to protect the public revenue. The question of how HMRC are entitled, or required, to deal with such returns is addressed in the following high court judgement (on the application UK Tradecorp Ltd) –v- CCE [2004] EWHC 2515 (Admin); [2005] STC 138. This was a Missing Trader Intra Community case in which the Commissioners had delayed payment of a repayment return while they investigated its validity.

The judge dealt with the investigation of such claims at paragraph 18 where he said:

“The commissioners are under a duty to conduct a reasonable and proportionate investigation into the validity of claims for a refund and repayment and a duty to act proportionately both in respect of the investigation and in dealing with the taxable person's claims generally. See R (on the application of Deluni Mobile Ltd) v Customs and Excise Comrs [2004] EWHC 1030 (Admin) (Deluni). The duty to investigate is applicable both to the claim to the refund and repayment and to the question whether there is a right to set-off (or indeed a claim for a further payment from the taxable person). The duty embraces an obligation to keep all investigations under review. The commissioners are entitled to take a reasonable time to investigate claims prior to authorising deductions and repayments and what is a reasonable time within which to complete an investigation must depend on the particular facts: Strangewood [1987] STC 502 at 505. The availability and proper exercise of the commissioners' powers of investigation are essential to maintain the fiscal neutrality of VAT and prevent refunds being made to parties not entitled to them. The postponement of repayment of input tax pending the outcome of the investigation is, as a matter of principle and subject to questions of proportionality, entirely compatible with the Sixth Directive. Whilst the burden of proof is upon the taxable person to establish that the investigation of his unadmitted and unadjudicated claim and the failure to make a part or interim payment is unreasonable or disproportionate, the burden is on the commissioners to justify non-payment of it once the claim is admitted or established and the period of investigation of any cross-claim.”
There is no automatic right to repayment and HMRC is not obliged to repay VAT until it has had reasonable opportunity to verify a claim. The information currently held does not support that the supplies for which you are seeking to make the adjustment were made by yourself. As such, you are not entitled to make an adjustment for sales you have not declared. What constitutes as ‘reasonable’ depends on the specific facts and complexity of the case, as referenced above, this principle is supported within- Strangewood [1987] STC 502 at 505. While the enquiries began in 2021 and concluded in 2025, the delay was primarily due to the complexity of the business transactions and the repeated extension requests throughout the enquiry. Taking this into consideration, I believe HMRC has acted reasonably and proportionally throughout the course of the enquiry. Accordingly, this constitutes as an adjustment to a VAT credit under Section 25(3) of the VATA94, rather than an assessment under section 73 of the VATA94, as asserted by your representative in the review request dated 28 March 2025. Therefore, the standard time limits for assessments do not apply, and the adjustment to your 09/21 VAT credit is valid and not time bound.[8]An appeal was submitted by the Appellant, stating that the appeal against the decision in the latter was made under s83(p) of the VAT Act 1994 being against (p) an assessment— (i) under section 73(1) or (2) in respect of a period for which the appellant has made a return under this Act[9]The grounds for appeal were that HMRC's assessment reducing the repayment claim on the return was made outside of the time limits.[10]HMRC’s position is that the decision is made under s 25(3) of the VAT Act 1994, and is not an assessment under section 73.[11]HMRC refer to their internal guidance manual, which states (VAEC 8320): When a pre repayment credibility query is referred to the regional office and the subsequent verification identifies that an adjustment is required, the possible outcomes are• a lower repayment becomes due,• a greater repayment becomes due or,• the repayment return reverts to a payment return. Where a pre-repayment credibility check reveals that a lower repayment is due, we cannot and do not make an assessment under s73 VATA 1994 as there is no net tax due and none has been credited.

The law

[12]S25 VATA 1994 Payment by reference to accounting periods and credit for input tax against output tax. (1)A taxable person shall— (a)in respect of supplies made by him, account for and pay VAT by reference to such periods (in this Act referred to as “prescribed accounting periods”) at such time and in such manner as may be determined by or under regulations and regulations may make different provision for different circumstances. (2)Subject to the provisions of this section, he is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him. (3)If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then, subject to subsections (4) and (5) below, the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners; and an amount which is due under this subsection is referred to in this Act as a “VAT credit”. (4)The whole or any part of the credit may, subject to and in accordance with regulations, be held over to be credited in and for a subsequent period; and the regulations may allow for it to be so held over either on the taxable person’s own application or in accordance with general or special directions given by the Commissioners from time to time. (5)Where at the end of any period a VAT credit is due to a taxable person who has failed to submit returns for any earlier period as required by this Act, the Commissioners may withhold payment of the credit until he has complied with that requirement. (6)A deduction under subsection (2) above and payment of a VAT credit shall not be made or paid except on a claim made in such manner and at such time as may be determined by or under regulations; and, in the case of a person who has made no taxable supplies in the period concerned or any previous period, payment of a VAT credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances. (7)The Treasury may by order provide, in relation to such supplies F2... and importations as the order may specify, that VAT charged on them is to be excluded from any credit under this section; and— (a)any such provision may be framed by reference to the description of goods or services supplied or goods F3... imported, the person by whom they are supplied F3... or imported or to whom they are supplied, the purposes for which they are supplied F3... or imported, or any circumstances whatsoever; and (b)such an order may contain provision for consequential relief from output tax.[13]S 73 VATA 1994 Failure to make returns etc. (1)Where a person has failed to make any returns required under this Act (or under any provision repealed by this Act) or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him. (2)In any case where, for any prescribed accounting period, there has been paid or credited to any person— (a)as being a repayment or refund of VAT, or (b)as being due to him as a VAT credit, an amount which ought not to have been so paid or credited, or which would not have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly. .... (6)An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following— (a)2 years after the end of the prescribed accounting period; or (b)one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge, but (subject to that section) where further such evidence comes to the Commissioners’ knowledge after the making of an assessment under subsection (1), (2) or (3) above, another assessment may be made under that subsection, in addition to any earlier assessment.

discussion

[14]The Tribunal does not have the full details of the arguments that may be advanced at any substantive hearing.[15]HMRC’s position is that as the grounds of appeal are in relation to time limits set out in s73 VATA, and as (they say) this is not an assessment under s73, the time limits are irrelevant and therefore there is no prospect of success.[16]HMRC say that the reason that this is not an assessment under s73, is that this is not ‘an amount of tax due from him’ it is merely an adjustment to the amount of tax the Appellant says is due as a credit from HMRC.[17]However, in the decision notice dated 26 February 2025, which related solely to this decision, the letter clearly stated that one of the options available to the Appellant was an appeal to an independent tribunal.[18]HMRC clearly therefore envisage that elements of the decision in this letter are appealable. HMRC do not specific which parts of the decision in this letter they consider appealable, or if there are any parts they consider are not appealable.[19]HMRC characterise their action as an adjustment under s25(3). However, s25(3) defines a VAT credit; it does not provide a procedural framework for adjustments[20]S25 (4) (5) and (6) set out conditions as to payment of that credit, or hold over of that credit, or withholding of the payment until further requirements have been complied with.[21]The case law relied on by HMRC in relation to this discusses timing of VAT reclaim payments, and checks that HMRC are allowed to make before a repayment, I do not consider that it sets out clearly HMRC’s contention that an adjustment to a VAT credit should not be subject to appeal, where that adjustment is envisaged to be final, rather than subject to further checks.[22]I have also considered the case brought to my attention by the Appellant, that of Aria Technology Ltd v Revenue And Customs [2020] EWCA Civ 182.[23]It does not address the particular point at issue here, but it does make clear that there is no statutory definition of ‘assessment’. Therefore given this lack of statutory definition, I do not think that HMRC has shown, clearly enough to merit a strike out, that the legislation in relation to assessments is not relevant here.[24]I consider that the Appellant has an arguable case that this decision should fall within the relevant time limits set out in s73 VATA 1994.[25]HMRC invited the Tribunal to make certain directions if the appeal were not struck out.[26]I have today also made directions to further the case management of this case.

decision

[27]The application is therefore dismissed.

Right to apply for permission to appeal

[28]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 15 April 2026