HMRC Wrong About Time Limit

February 6, 20230

In Pavan Trading Ltd, HMRC applied the wrong logic and then doubled down at the review stage, ending with the tribunal being less than impressed.

When a business exports goods, the sale can be zero rated, but the zero rate is on the basis that the business holds evidence of export.

Pavan Ltd case (TC8712)

The taxpayer would buy medical syringes from a UK supplier and repackage them at his home before posting them to customers based in the USA. Each package had an invoice and a CP72 export document, and was sent via the Post Office with a certificate of postings/tracking details obtained.


VAT Notice 703 paragraph 3.3 states “A supply of goods sent to a destination outside the UK are liable to the zero-rate where you:

  • Make sure that the goods are exported from the UK within the specified time limit
  • Obtain official/commercial evidence of export within the specified time limits
  • Keep supplementary evidence of the export transaction.

These bullet points have the force of law.

Paragraph 3.5 specifies that the time limit for exporting the goods and obtaining the relevant evidence is in each case three months from the time of the supply.

Paragraph 6.1 sets out the evidence that is required for a supply of exported goods to be zero-rated for VAT.

“For VAT zero-rating purposes you must produce official evidence and/or commercial evidence. These must be supported by supplementary evidence to show that a transaction has taken place and that the transaction relates to the goods physically exported”.

Paragraphs 6.2 and 6.3 (which do not have force of law) give examples of official evidence and commercial evidence such as bills of lading etc. Paragraph 6.4 sets out what supplementary evidence is available to support the claim, such as customer order, export invoice, consignment note, evidence of payment etc.

HMRC’s approach

The taxpayer had good records and was able to produce both official and commercial evidence.

There were some anomalies in the taxpayer’s paperwork, for example, not all payments from USA customers could be identified, deliveries were not made to customers’ main addresses and the values stated on the parcels were lower than the true value.

Crucially, the HMRC officer stated the main reason for assessment was the taxpayer had not supplied HMRC with the export evidence within three months. The officer told the tribunal that had the taxpayer given the main/supplementary evidence to HMRC within three months of each export, HMRC would have accepted the export evidence for zero rating purposes.

Just to reiterate, HMRC was saying the assessment was because the taxpayer had acceptable evidence of export but that the law required the taxpayer to physically give that paperwork to HMRC within three months of each and every export.

The tribunal

Tribunal concluded that HMRC made two errors in law. Firstly, the three-month period for obtaining evidence does not mean the taxpayer has to provide that evidence to HMRC within three months, it simply means the taxpayer must hold the evidence in their records within three months of the transaction.

The second error was that HMRC was of the view that all the evidence of export must be contained within the CP72, ignoring established case law and HMRC’s own guidance that a basket of evidence from a variety of sources is acceptable evidence.

HMRC’s solicitor tried to argue that the three months are not just to “obtain” evidence but to also pass it to HMRC. The review stage letter upheld the assessment because the evidence of export was not easily available and seems to confuse the time limit where HMRC is inspecting a business’s records and the records are not available at the time of inspection.

The tribunal concluded “This error was started by Officer Bains, perpetuated by the nonsense written by the review officer, and then compounded by HMRC’s statement of case and skeleton argument. If there was ever a counsel of perfection for the provision of export documentation, then this appellant has achieved it and we have absolutely no hesitation in allowing this appeal.”


It is concerning that HMRC could go so wrong on such a basic concept. But more concerning is that the reviewing officer also took the same illogical approach as the original HMRC officer. As reviews are usually performed by the solicitor’s office, one would hope that some legislative logic would be applied but that was not the case.

To make matters worse, HMRC then pursued this case to tribunal, still applying the exact same arguments as before, with only the tribunal able to apply some much-needed common sense to the situation by simply applying the actual law.

That it got this far can only indicate there has been a complete and utter breakdown within HMRC on both a procedural and technical level and this case demonstrates the further degradation of what was once a respected service. Had HMRC succeeded, the implications for any export business would not bear thinking about.

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