Independent VAT Consultant
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VAT: HMRC must do better

Neil Warren has been prompted by a particularly poor performance by HMRC at the tax tribunal to think about how it could improve its customer service in 2020.

20th Jan 2020
Independent VAT Consultant
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The FTT case of Dorset Trimming Co Ltd (TC07480) produced a win for HMRC on a technical issue concerning VAT registration. However, a very worrying aspect of this case was that HMRC failed to properly prepare for the hearing. It instead relied on the accountant of a small two-man company from Weymouth to produce the necessary papers for the case to proceed.

The tribunal noted: “With the help of those at the hearing centre and the appellant’s representative, it was possible for Dorset’s appeal to be dealt with. Had this not been possible the tribunal would have had no hesitation in making an order of costs against HMRC on the basis that it had acted unreasonably in conducting the proceedings without adequate preparation.”

The Dorset case was a bad day at the office for HMRC, which got me thinking about five areas where HMRC could make improvements in its VAT administration.

Be more flexible with requests for written rulings

HMRC’s policy on written rulings is very clear: if an issue is properly explained in the VAT notices and VAT manuals, then an HMRC officer will not give a written ruling. The department is more accommodating with charities.

However, there are cases where taxpayers have read the HMRC guidance and don’t understand it. This is where taxpayers would benefit from a bit more HMRC support to ensure they get things right, as illustrated by the Westow Cricket club case.

Better training for staff answering calls

Many HMRC officers started their careers working in direct tax for the old Inland Revenue, and have since transferred to VAT. However, VAT requires a different mindset and way of thinking. I have received a lot of feedback from accountants that say calls to the HMRC VAT helpline service do not produce satisfactory answers to queries. I believe more training time is needed.  

Reduce time dealing with option to tax requests

I can’t understand why, in this digital age, it takes the Option to Tax unit in Glasgow 40 working days to reply to an enquiry from a taxpayer as to whether there are any property elections in place on his VAT registration. This causes problems when deals are about to happen and VAT is remembered at the last moment.

Surely an IT-based system could be put in place so that taxpayers can view past elections on their online VAT account?

Consistent reasonable excuse appeals

A fellow football enthusiast recently commented that the action taken by referees following a bad foul often depends on how the player being fouled reacts rather than how bad the tackle that was made by the offender. There seems to be a similar issue with reasonable excuse appeals following a late VAT payment or return.

HMRC sometimes make decisions based on the quality of the appeal letter sent by the taxpayer rather than the severity of the original offence. It is important to get consistency. However, perhaps it is time to rewrite the rule book on the whole issue of “reasonable excuse”.

Publicise ‘liable not liable’ policy

I refer to this topic as “The MI5” part of the VAT regulations because the guidance in the HMRC manuals was withdrawn some years ago, so it is now top secret. A liable not liable situation occurs when the turnover of a business goes over the VAT registration threshold, but it fails to register on time, with HMRC making allowances if turnover fell below the threshold again. It would be very helpful if we knew the mathematical approach to working out which periods VAT is due for.


In reality, HMRC needs more staff and resources to deliver a top-quality service to taxpayers. A lack of staff means that there are too much fire-fighting and crisis management going on. A prime example is turning up to a tribunal hearing without the necessary papers and getting rebuked by the judge.

To quote the late cricket commentator, Fred Trueman: “Things were very different in my day.”  

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