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HM Revenue and Customs (HMRC) investigations can be a daunting and potentially very costly experience for any business. However, as a tax tribunal ruling showed, clear and comprehensive record-keeping is the best defence.
The case concerned two traders in the business of exporting designer clothes and accessories that had been purchased in the UK to China. Following an investigation, HMRC was unconvinced that many items had in fact been exported. On the basis that the goods did not qualify for VAT zero-rating, the traders were issued with back-dated VAT assessments totalling £379,280.
In challenging those bills before the First-tier Tribunal (FTT), the traders presented evidence in the form of retail receipts, packing lists, bank statements, postal tracking numbers and social media exchanges. The packing lists itemised the exported goods, citing their value, brand, colour and size. Dispatch of the goods and payment for them could be cross-referenced to the postal tracking numbers and the bank statements. Customers' orders were evidenced on social media.
Upholding the traders' appeal, the FTT found that the conditions for the zero-rating of exported goods had been met. The evidence clearly identified the goods and their value and the traders had succeeded in establishing to the required standard that they had been exported. The assessments were overturned.