Are retrospective assessments permissible when HMRC didn’t question the tax treatment during prior inspections?

Judicial review (JR) applications allow for an important check on HMRC’s exercise of powers and provide an avenue of redress to a taxpayer where HMRC is found to have acted illegally irrationally in breach of procedural fairness or in breach of a legitimate expectation. However the grounds of JR have repeatedly been described in cases as involving ‘high bars’ to overcome and this has played out in a series of recent decisions dismissing taxpayers’ JR claims.

Here we consider the recent High Court judgment in R(on the application of Realreed Ltd) v HMRC [2023] EWHC 1572 (Admin) (‘Realreed’) where the court considered whether HMRC’s failure to spot errors in a taxpayer’s VAT accounting treatment of its supplies during inspection visits could lead to a breach of the taxpayer’s legitimate expectation...