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VAT errors signal growing stress on HMRC helplines

HMRC’s VAT helpline and repayment verification team has been giving out questionable advice recently. Is there a shortage of experience in these teams, asks Neil Warren.

1st May 2020
Independent VAT Consultant
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HMRC helplines giving odd advice as virus pressure grows
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This article is not intended to criticise HMRC. The way the department has dealt with the massive challenges of the Job Retention Scheme and Self-Employment Support Scheme (to name just two initiatives) deserves maximum credit.

But when you are confronted with urgent and highly complex issues, it is likely that other parts of an organisation might suffer. Don’t forget that there is still the Brexit challenge for HMRC to deal with and the lockdown of offices throughout the country.  

Recent queries

My concerns were aroused by wrong advice given to accountants recently by both the VAT telephone helpline service and staff dealing with VAT repayment returns. The accountants felt uncomfortable about the answers given and therefore made further checks. To be honest, a lot of the HMRC answers were quite logical, but as we all know, the world of the nation’s favourite tax sometimes defies this word.

Four examples

  1. VAT group registration: In this instance, the first officer contacted said that VAT registered business can keep the same VAT number if it forms a VAT group with other companies. This is not correct. A VAT group is always given a new VAT number, with the individual members deregistering the day before the new registration takes effect.
     
  2. Flat rate scheme: The officer said that grant income had to be included in the flat rate scheme calculations because the scheme applies to all business income. This is partly correct: exempt and zero-rated income is included, but not income that is outside the scope of VAT. Most grant income is outside the scope because it does not relate to a specific supply of goods or services.
     
  3. VAT and property: HMRC enquired into a repayment VAT return submitted by a property developer. The claim related to input tax claimed on the purchase of a pub, which will be demolished and new residential apartments will be built for sale (zero-rated) on the site. The officer asked the accountant why the developer had not avoided being charged VAT on the property purchase by completing form VAT1614D and giving it to the seller. The answer is because a VAT1614D is only relevant when a building is going to be used or converted into dwellings, it is not relevant when the building being purchased is to be demolished.
     
  4. Option to tax: The final one is bizarre. The officer told the accountant that if a seller has opted to tax a property, then the buyer must also opt to tax a property as a condition of claiming input tax. This is not correct: input tax claims depend on the use of the building and not whether the buyer has opted to, ie wholly taxable use of the building means input tax can be claimed. The officer changed his approach when challenged and said that it was HMRC’s “informal policy” that a buyer should always opt to tax if the seller has opted – oh dear!

Alternative sources of information

My advice is the same as that currently being given by banks: if you can deal with your VAT question without contacting HMRC by telephone, that is definitely the best approach. This can be done by consulting a combination of VAT notices, HMRC manuals, search engines, chatting to colleagues or consultants with VAT knowledge.

I have just called the VAT helpline number and the voicemail message is very honest about the current problems, which means there are “fewer advisers,” restricted hours of availability (Monday to Friday 8am to 4pm) and a warning about longer delays to speak to a representative.

We live in difficult times where new strategies are needed for many situations.

Have you encountered similar experiences with HMRC’s VAT teams or other helpline advisers? Let us know your experiences by commenting below.

Replies (11)

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By Les Howard
01st May 2020 14:11

I have heard your fourth example being provided as standard advice from the HMRC helpline for many years. This can have serious implications later on, with the taxpayer unable to reverse his decision to opt to tax.

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By Echo761
04th May 2020 09:54

I have to say, these are just some of the very many examples of what I have been seeing over recent years. While I accept HMRC are under great pressure they have lost so many experienced staff and the new staff are being pulled in all directions.
I do have to laugh when HMRC are having the "cheek" to be seeking views on how to improve the quality of tax advisers... not of the HMRC variety.
Things have been going badly wrong in HMRC recently to the point where they are making big errors in VAT registrations, Option to Tax, Voluntary disclosures (where there was at least 21-week delay), the new system to replace "Vision" which is a "bag of bolts" and not VAT friendly....
Not meaning to have a rant at HMRC but things have been going badly wrong for a while, long before the current situation, which I am sure will be the excuse used to cover mismanagement over years.

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By dul50n
04th May 2020 10:18

Poor advice is the least of our problems...

The Annual Accounting Unit display a unique level of poor performance, since before the Coronavirus pandemic, that I've never experienced anywhere else:

- Complete failure to recognise applications for annual accounting made from within clients' own Gateway accounts
- Lost and destroyed annual accounting direct debit applications
- Issuing assessments for unfiled returns under MTD when the return can clearly be seen as filed through the Agents Service account
- Taking excessive payments on account through direct debit, without prior notice, that bear no relevance to the previous year's liability

All served up with a severely misplaced pervasive holier-than-thou attitude

In response to an enquiry we made on behalf of a client last week about a £30,000 payment on account, taken without notice, which was more than the total liability of the previous year, the reply was jokingly "Well we have to try to recoup money somehow". I'm afraid the client doesn't see the funny side of it now that his bank account has been cleared out and he has to run around trying to get the bank to refund it

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By Ian McTernan CTA
04th May 2020 10:30

Fine examples of what should be a simple tax made needlessly complicated by having so many exceptions and exemptions and exceptions to exceptions....

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By Duggimon
04th May 2020 10:35

It is a simple fact of HMRC's operations that, while they have plenty of well versed and competent people able to determine the correct tax treatment of complex issues, none of those people work in the call centres answering phones.

Many of the issues they have could be solved, or at least alleviated, if the call centre staff would just not give an answer if they don't know the answer.

In any event, while it doesn't help the public at large, agents should be experienced enough with these issues that they know HMRC cannot be called for competent advice on complex tax issues, or even some simple ones.

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Replying to Duggimon:
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By Echo761
04th May 2020 10:55

I would not call HMRC for any advice, as you suggest, advisers should know the answers... however, there are some things that Advisers cannot do and need HMRC to do it for them, including VAT register a business, arrange for an option to tax, repay a valid claim for VAT.

If they constantly "stuff up" (being polite) then what can we do? It makes us look incompetent in front of the client and adds unchargeable time to what in many cases should be a straightforward admin task.

For example I tried to arrange for a client to be VAT registered as they were opting to tax a property. This was sent to VAT reg team in October 2019. The VAT reg team sent out the VAT registration cert... but no option to tax - even though this was the only taxable supply they would be making... to date (6 months later) the OTT has still not been issued due to constant mismanagement by HMRC of firstly not sending the OTT forms to the OTT team, then a sequence of clearly ill informed/trained OTT staff asking ludicrous questions. Nearly all of which were notified in the original cover letter sent in October. In addition they keep "cutting out" me as the adviser from their replies... causing further delays.

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Replying to Echo761:
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By dul50n
04th May 2020 11:09

HMRC errors used to add unchargeable time, but not anymore. I've become well versed in establishing HMRC's fault, passing the charge on to the client and then recovering it for them from HMRC. It's a long drawn out procedure but I get full recompense at the end of it

Recompense may well come from the public purse, but the public purse is also paying the salaries of these poor performers

If everybody sought compensation they would soon make improvements, but I suspect most don't and just write off their time and HMRC carry on regardless

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Replying to dul50n:
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By Echo761
04th May 2020 11:19

In my experience of claiming compensation from HMRC for errors, they pay out and don't give a "toot". I have successfully claimed a number of times, where it was worth it.
I think they just see it as a cost to the "business". It makes no difference - they are not commercially driven. If a business was hemorrhaging money on claims for errors they would sit up and take notice. As HMRC pay the compensation out of the money they often have bullied out of "customers" it makes no difference to them.

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By dgilmour51
04th May 2020 12:18

I have the same sympathy for HMRC being under stress as they give to me - viz. none.
Furthermore, since they have no duty of care to their 'customers' its a completely one-sided situation.
I can see no reason not to 'have a rant' at HMRC, given the manifest steady erosion of everything from skill to responsiveness vis a vis their increasingly loading the impossible on to the profession.
The fact that it is impossible to traduce the correct operational steps from a combination of the statute and some source of reliable guidance, which ought to be HMRC, says it all.
They have a brass neck of giraffe-like proportion.
John 11:35

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By Justin Bryant
04th May 2020 16:31

It's no less surprising than the duff tax answers you see here from the likes of TD etc.

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By 625VA
06th May 2020 19:40

I have to ask why Neil feels it is so important NOT to criticise HMRC? I am tired of paying high fees to Institutes who have weak, PC individuals who are supposed to promote their members' cause. Now we have Neil terrified of criticising HMRC. Perhaps if we were more direct and forceful with HMRC, reported more and promoted their awful treatment of taxpayers and professionals, then the profession may get more respect from HMRC. Let's get together as professionals and highlight HMRC's shortcomings, instead of always being apologetic for their shortcomings!

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