No VAT debt existed

The taxpayer was in practice as a solicitor dealing with asylum and illegal immigration cases. Much of her work was paid for by the Legal Services Commission under a block contract.

She appointed an accountant to prepare her VAT returns but these were completed incorrectly.

HMRC applied for a bankruptcy order to be made against the taxpayer on account of an outstanding payment of VAT due of £28 559.79.

The taxpayer’s application to have the order annulled was refused so she appealed.

HMRC subsequently accepted that because the taxpayer’s clients’ usual place of residence was outside the UK the services supplied to them were not subject to VAT.

The taxpayer argued that if the debt was never due the bankruptcy order should not have been made.

The Chancery Division concluded that based on the legislation in force at the time ...