Taxable and exempt supplies

DCM made taxable supplies of spectacles and exempt supplies of eye tests and dispensing services. Disputes arose between the taxpayer and HMRC on several points including:

• whether an assessment had been made within time limits;
• whether HMRC was entitled to amend repayment returns; and
• the allocation of discounts between standard-rated and exempt supplies.

The First-tier Tribunal dismissed the taxpayer’s appeal but the Upper Tribunal allowed the time limit issue. Both parties appealed to the Court of Session.

DCM considered the assessments were out of time (VATA 1994 s 73(6)(b)) because they were made more than one year after HMRC had enough information to justify the assessments. The Court of Session held the Upper Tribunal had erred in law because it was took account of its own evaluation of the evidence rather than examining whether the First-tier Tribunal’s findings were reasonable – which they were. In essence the lower tribunal had...