There is an old saying (in the world of VAT at least) that just because it’s illegal doesn’t mean it’s not taxable. When trying to make this point, HMRC has come unstuck, not for the view but their timing.
The taxpayer supplies cannabinoid products. It had sought a ruling from HMRC that these products were zero-rated as food. HMRC did not agree and issued a substantial assessment (£430K+) for sales that HMRC saw as standard rated. This was appealed to Tribunal and each party submitted their statement of case. Then, sometime later, HMRC sought to amend their statement to add that the supply was subject to VAT at 20% because it was an illegal product.
Source Richard Luckin
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