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VAT: How to challenge HMRC’s decision

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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?

31st Aug 2021
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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.

Review process

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.

Appeal process

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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Replies (8)

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By Paul Crowley
31st Aug 2021 14:59

Reallly this adds up to Appeal by return of post
HMRC posting is, shall we say, not reliable or timely.

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Replying to Paul Crowley:
By SteveHa
31st Aug 2021 16:19

Whilst you are correct, the FTT process allows an appeal as soon as HMRC are out of time, and so HMRC failure should not be a barrier to appeal.

Oddly, the last time I attended a "tribunal" (though it wasn't, it was the Commissioners back then, and not even the Special Commissioners) was during my Revenue days. Since then, I've only had one case where an appeal was notified to the FTT.

I was looking forward to my day in court on behalf of the client, but then HMRC caved. C'est la vie.

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Replying to SteveHa:
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By Paul Crowley
31st Aug 2021 18:39

Last one I attended, new system,but not VAT, tribunal decided that client was allowed to keep his gross status.
Last one listed, HMRC refused all contact until the very last week
That one was for £60,000 of late filing fees on CIS, on one sole trader.
Search 'CIS Penalty avalanche'
Yet another HMRC IT failure.

In fairness to HMRC VAT, they will look to talk and listen and operate on an email basis
Not yet seen any unreasonableness

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By Geoff56
31st Aug 2021 17:09

I requested a review of a VAT decision (rejection of application for MTD exemption) last September, within the 30 days. Despite two e-mails, a phone call and a letter, I have not received a response. Following the link in this article to the legislation, I now read that if HMRC does not give notice of its conclusion within 45 days, the review is to be treated as having upheld the original decision.

That leaves me not knowing if a review was ever undertaken, or if we just have a decision by default.

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Replying to Geoff56:
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By Paul Crowley
31st Aug 2021 18:41

Whoops, forgot about that one
We had one client that they agreed, but then changed their mind and shut off access to the old system.

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Replying to Paul Crowley:
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By Geoff56
01st Sep 2021 08:52

Are you sure HMRC hasn't just migrated your client to the new platform, which you have to access through your Agent Services Account, but you can then still file VAT returns the old way?

I understood that HMRC cannot actually sign up a taxpayer to MTD; the taxpayer or the agent must initiate the process. I had a non-MTD client for whom I received a message when trying to access their VAT account, that implied they had been signed up for MTD; whereas they had only been moved to the new platform.

Here is one thread of a few, discussing this: https://www.accountingweb.co.uk/any-answers/mtd-for-vat-4

Apologies if I've misunderstood and this isn't the issue.

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By Malcolm McFarlin
01st Sep 2021 10:11

I would never recommend submitting an appeal to the FTT by post -it should always be done online. I've been dealing with indirect tax disputes for over 15 years and the FTT e-mail system is quite efficient.
Your article does not mention ADR which is a useful negotiating tool, but for indirect tax cases an appeal must be submitted to the FTT before you can apply for ADR.

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By Les Howard
01st Sep 2021 10:11

If you are involved in tax, of whatever flavour, I would recommend attending a Tax Tribunal Hearing. You will see how it operates first hand. And this is still possible now most hearings are conducted remotely. A helpful experience should one of your clients need to Appeal.

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