HMRC’s behaviour was reasonable

The taxpayer hired out generators for which it also supplied fuel. The supply of the generator was subject to standard rate VAT but the taxpayer applied the reduced rate – 5% – to the fuel element. HMRC said the taxpayer made a single composite supply of generators with fuel taxable to VAT at the standard rate. The taxpayer appealed.

On the last day of the First-tier Tribunal hearing the taxpayer applied to introduce new evidence showing that there was a nationwide network of other fuel suppliers so that customers had a genuine choice about whether to acquire the generator and fuel together.

HMRC said it was not in a position to cross-examine the witness immediately so the tribunal allowed it 28 days to decide if it wished to do so. After that period HMRC told the tribunal and the taxpayer that in light...