Clearance application must be full and frank

The dispute concerned the VAT treatment of a training programme for airline cadets. Briefly each cadet had to pay a bond to the taxpayer to cover the costs of their training on completion of which the bond was transferred to the relevant airline which employed the cadet. The taxpayer had obtained a non-statutory clearance (NSC) from HMRC which gave a favourable VAT treatment but HMRC later revoked the ruling on the basis that the taxpayer had not given full and frank disclosure in its application. In particular it had not referred to the fact that in many cases the funding would be via a salary sacrifice arrangement. Had that been disclosed then HMRC would have not given the ruling.

The draft application for a ruling showed that the taxpayer’s advisers had expressly referred to a potential salary sacrifice arrangement but the company had asked for the reference...