HMRC VAT written enquiries and clearances
Monday, 22 March 2021
There was an interesting Upper Tier appeal published recently where the taxpayer was found to have a reasonable excuse against a VAT penalty issued by HMRC. The Tribunal found that after writing to HMRC, the response the taxpayer received was 'not as comprehensive in its answers as it might have been.'
This led to the appellant relying on HMRC’s response which, despite the taxpayer’s written request asking a specific question in enough detail, did not recognise the core of the issue at hand.
We have been fortunate that replies received from HMRC in response to written enquiries and non-statutory clearance applications recently have been clear and concise, but that has not always been the case. Clearances were the subject of scrutiny as part of the Office of National Tax Simplification’s review of the UK’s VAT system a few years back. Given these experiences, it’s easy to see why the taxpayer in this case may have relied on a document that wasn’t as comprehensive as it might have been.
We’ve found that the written enquiry (particularly the recently added online enquiry form) and the non-statutory clearance procedures remain a useful tool where HMRC’s guidance is unclear or does not address a client’s precise circumstances or set of facts. By asking the correct questions, in the correct manner, whilst referring to HMRC's guidance and explaining why you feel it is unclear or does not quite fit your case, you will often be presented with a useful response from HMRC. Where there is ambiguity or doubt, given the complexities of VAT, a ruling can be obtained from HMRC which acts as a very useful tool in protecting against penalties at a later date, should a dispute arise.
Please don’t hesitate to use an expert when querying HMRC guidance or seeking a ruling on the liability of products or activities. Our specialist dedicated VAT team are always pleased to provide assistance.