An appeal against a £14m penalty for failure to meet VAT record-keeping requirements on the physical delivery of gold bullion was successful. The Upper Tribunal (UT) agreed that there was no delivery of any bullion and therefore no record-keeping requirement relating to delivery.

Gold bullion

In Qubic Advisory Services Limited v HMRC [2024] UT106:

  • HMRC had challenged a Disguised Remuneration tax avoidance scheme which used gold bullion as a means of paying employees and avoiding PAYE.
  • As HMRC's Spotlight 30 notes, the scheme did not work for that purpose.
  • HMRC also assessed a tax avoidance scheme’s creators, AssetHound Limited later called Qubic Advisory Services Limited (together ‘QASL’), for VAT penalties of £14,821,380 under section 69A of the VAT Act 1994. 

VAT Notice 701/21 Gold Imports and Exports sets record-keeping requirements when there is a sale of exempt investment gold and the gold is delivered, or otherwise made available to a customer.

  • QASL maintained that the gold never actually left the bullion vault. The nature of the bullion vault scheme meant that no customer could take away their gold. There was no delivery.
  • The First Tier Tribunal disagreed and found for HMRC.

On appeal to the Upper Tribunal (UT), the appellant challenged the FTT findings and said it had been wrong not to place more reliance on the fact that the 'customer’ signed a waiver which acknowledged that they would never take delivery of the gold.

After the UT considered the wording of the waiver, it confirmed that it was valid. The FTT had erred, there was no physical delivery, and there could not be, there was no invoicing or further record-keeping requirement.

The appeal was dismissed

Editorial comment

With the benefit of hindsight, the evidence could have been presented better at the FTT.

Useful guides on this topic

VAT Penalties
When do penalties apply for VAT? What penalties are charged and how can they be mitigated?

Disguised Remuneration Zone
A zone all about the 'Disguised Remuneration', the Loan Charge, and how to settle up with HMRC in respect of any pay that has been disguised as loans and includes contractor loans and Employee Benefit Trust loans. 

Acting for a trust? Start here…
An essential guide for advisers and trustees on how to manage the tax affairs of a UK trust and avoid common pitfalls.

HMRC Spotlight 30
An artificial scheme which involved a theoretical obligation to pay the value of gold bullion to a trust at some point in the future. Legislation was introduced subsequently to ensure that all loans, debts or obligations arising from disguised remuneration schemes will be taxed as earnings if not already taxed or repaid by 5 April 2019.

PAYE Determinations
What to do if you receive a PAYE Regulation 80 or 72 determination.

External links

Qubic Advisory Services Limited v HMRC [2024] UT106