VAT: How to challenge HMRC’s decisionby
HMRC has checked your client’s business records and concludes that the client owes further VAT and possibly a penalty. You disagree with HMRC, what can your client do now?
For VAT, the first choice is whether to request that HMRC reviews the decision or whether the client wishes to go straight to the tax tribunal. If the client opts for the review, they can still later appeal the decision to the tribunal (but not vice versa).
Regardless of the choice, the taxpayer has 30 days from the date of the letter to notify HMRC or the tribunal. This period can be extended by HMRC or by mutual agreement and reviews outside this timeframe may be permitted, provided the client had a reasonable excuse for missing the 30 day window and acted as soon as they could after it closed. Out of time appeals may also be permitted with the permission of the tribunal.
A third option is to present further evidence to HMRC. The tax authority will then review this new evidence and respond accordingly. If the taxpayer still wishes for a review or to appeal, the original 30-day time limit still applies, but generally they will be able to request the review/appeal outside the timeframe as noted above.
By far the cheapest and easiest step is an HMRC review, costing nothing more than your time and the price of a stamp. The decision will be passed to a different HMRC officer who will reach a ‘new’ decision. HMRC has 45 days to notify the taxpayer of its new decision.
However, the impartiality of this process is often called into question; often in such cases the new HMRC officer will merely agree with their colleague. Reviews tend to be of more benefit where the dispute is of the facts, not the interpretation of the legislation. But regardless, as long as hopes aren’t set too high, a review is generally a sensible first step.
An appeal is a much more time consuming and costly process as it involves preparing a case to be passed to the first tier tribunal (FTT). A professional tax or law specialist should ideally handle the case on behalf of the client.
To start the appeal process you need to provide a scan of the HMRC decision letter and a summary of why the client is appealing. A separate form authorising you or another party to represent the client also needs to be supplied. Finally, evidence to support the appeal needs to be sent at the same time.
Alternatively, form T240 can be posted to the FTT.
For VAT disputes the FTT requires the client to have paid the disputed tax in full at the time of the appeal submission, unless this would cause undue hardship.
The FTT will review the request and notify the authorised party whether the appeal will go ahead. It may also request further documents to allow it to make this decision.
If successful the authorised party will receive a hearing date. At present appeals are being handled by video call, but face-to-face hearings may start again in the future.
The taxpayer‘s representative (or the taxpayer themselves) will speak at the hearing and HMRC will put forward their side. Witnesses can be called, with the FTT’s permission, by either party. The judge will then decide on the disputed matters. Depending on the complexity of the case, the decision could be announced on the day or up to two months later.
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