Optician Fights H M Revenue and Customs in the High Court

In the case of DCM (Optical Holdings) Limited vs. HM Revenue and Customs (HMRC) the taxpayer was a retail optician who made taxable and exempt supplies.  They applied for the approval of a special method for the deduction of input VAT based on an analysis of 'floor space'. HMRC refused the application and the VAT Tribunal decided that the action taken by HMRC was reasonable.

The Company appealed the decision to the Court of Session to consider whether the Tribunal had been wrong in holding that it had only supervisory jurisdiction in such cases.  In other words, The Tribunal believed it could not substitute its own views for those of HMRC and that its powers were limited to deciding whether HMRC had acted reasonably in reaching its decision.   The Court found that the Tribunal had full appellate jurisdiction and could not only decide whether the Commissioners' decision was reasonable but could also consider the merits of the appellant's proposed partial exemption calculation. Although the Tribunal did not have the power to propose a special method of its own, it did have the power to vary or modify a proposed method so that it could be approved.  On this basis, the case was referred back to the Tribunal to re-hear the appeal of the taxpayer.  Watch this space for the final outcome.........