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  • Adnan Khalid

Incorrectly charged VAT cannot be recovered from HMRC – Kang & Mand Limited v HMRC (2020)

In Kang & Mand Limited v HMRC (2020), the First Tier Tribunal (FTT) dismissed the appeal on the grounds that VAT was incorrectly charged by the seller.


In August 2016, Kang & Mand Limited (K&M) purchased a former public house for £315,000. The seller charged VAT on the purchase price which amounted to £63,000 and which K&M paid on completion. Following the completion of the property purchase, K&M submitted its VAT return claiming £63,627 as input tax.

In June 2018, following a VAT inspection HMRC raised an assessment of £63,627 as no sales invoice or equivalent was provided. Section 73 (3) of the VAT Act 1994 allows HMRC to make an assessment if it appears to them that a return is incorrect or a repayment should not have been paid.

Schedule 9, Group 1 of the VAT Act 1994 provides guidance on the supplies of land and buildings that are exempt from VAT and those that are excluded from the exemption.

It was raised by HMRC, that the sale of the public house was an exempt supply and that the seller should not have charged VAT on the sale of the property. In addition, the completion statement also showed that SDLT had been paid to HMRC on a VAT inclusive price of £388,000, resulting in an overpayment of £3,150 SDLT.

K&M’s appealed to the FTT on the grounds that:

• The seller was a VAT registered trader and was required to charge VAT of £63,000

• If the K&M is not able to recover the input tax, HMRC will receive a windfall of £63,000, which is contrary to VAT law and against the principles of natural justice.


At the hearing, K&M conceded that in fact the appeal was misconceived. He accepted that a mistake had been made and that as the sale of the property was an exempt supply, VAT should not have been charged by the seller. The appeal was dismissed and the assessment for £63,627 for over claimed input tax is confirmed. The decision can be viewed here.

It remains important to review your purchase invoices to ensure that correct VAT is charged, as this case highlights that incorrect VAT charged cannot be recovered from HMRC as input VAT.

In case you face a similar situation regarding appealing a penalty for non-payment of tax, please feel free to contact our tax specialists at Integritax Accountants. We are available to ensure you are as tax efficient as possible.

Please contact us on 0121 663 1890 or email for more information.

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