Commentary

BB/28B/04 VAT—correcting liability errors

Part V16 Forms and other HMRC material

BB/28B/04 VAT—correcting liability errors

BB/28B/04 VAT—correcting liability errors

Business Brief, Issue 28. 26 October 2004

Business Brief 16/03 (BB/16A/03, Division V16.3) explained Customs' practice of announcing changes to policies and our interpretation of the law in Business Briefs. It went on to restate the policy set out in earlier Business Brief 14/94 (BB/14/94, Division V16.3) concerning over and underpayments arising when announced changes are not implemented by businesses. This Business Brief expands on that policy statement and deals more generally with the tax implications of changes in policy and in the interpretation of the law.

Changes in policy

Generally, a change in Customs' policy is not applied retrospectively. Most changes will be announced in a Business Brief and in VAT Notes issued to all registered traders. They will be applied either from a current date or from some future date in order to give businesses time to prepare for the change or perhaps to provide for a transitional period so that businesses have an opportunity, for example, to benefit from an existing policy before a less beneficial policy is introduced.

Changes in interpretation of the law

Significant changes in Customs' interpretation of the law will also be announced in a Business Brief and in VAT Notes issued to all registered traders. Unlike a prospective policy change, however, a change in our interpretation of the law, which will usually take place as a result of litigation, means that, in Customs' view, the relevant legislative provision should always have been applied in accordance with the revised interpretation.

For example, the High Court

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