Legitimate expectation after HMRC instruction

The taxpayer was incorporated in March 2022 and applied to register for VAT on a voluntary basis with effect from 1 October 2022. This was because its turnover from the sale of jewellery and bags was approaching the compulsory registration threshold.

It submitted its application to register on 22 September 2022 but HMRC did not issue the VAT number until 28 December 2022. In the meantime the director strictly interpreted a sentence in an email from HMRC which said: ‘You should wait until your VAT number is confirmed before you … charge customers for VAT.’

The first VAT return to 31 December 2022 therefore included an input tax claim of £4 502 but no output tax. HMRC corrected this error by adjusting the output tax box from zero for £14 256 using its power of ‘best judgement’ (VATA 1994 s 73(1)). The input tax figure was...