Realreed: When does an HMRC inspection create a legitimate expectation?

The higher courts have issued several judicial review decisions recently many of them considering legitimate expectation as the main grounds for review. While there are notable successes many cases have been unsuccessful illustrating the challenges in overcoming each of the hurdles to establish a legitimate expectation.

The case of R (on the application of Realreed Ltd) v HMRC [2023] EWHC 1572 (Admin) (Realreed) falls into the latter category. The technical issue revolves around whether supplies of serviced accommodation should be taxable or exempt which depends on whether the supplies are of residential or holiday accommodation.

The case will be heard by the First-tier Tribunal later this year. The High Court dealt purely with the question of whether HMRC VAT visits could create a legitimate expectation that HMRC had accepted the VAT treatment applied by the taxpayer in circumstances where it did not specifically say so...