VAT: How to deal with HMRC
Neil Warren provides tips on dealing with HMRC after Judge Richard Thomas criticised an accountant who was “out of touch with what happens in tax”.
The FTT case involving Daniel Potts (TC07076) was a “routine win” for HMRC. It related to a late VAT registration date and associated penalty. The taxpayer had no chance of escaping either the tax or the penalty, and his appeal was correctly dismissed.
The taxpayer’s accountant (Edward Bridge FCA) raised a number of reasons why he felt that both the tax and penalty should be withdrawn, including hardship, blame culture, lack of advice from HMRC about when to register and the taxpayer’s ignorance of the law. All of these arguments were dismissed.
I was interested in Judge Thomas’s comments about Bridge being “out of touch” and that “the world of tax had passed him by” as he had retired many years before and come out of retirement to do a limited number of jobs. The tribunal picked up on Bridge’s use of words from a bygone era such as “District Inspector”, “Inland Revenue” and “Back Duty”.
Dealing with HMRC
The judge’s comments got me thinking about my own approach to dealing with HMRC in the modern world and I came up with five observations:
Always stay calm
A comment in the Potts case was made that Bridge became very frustrated with the HMRC officer. At first, he was “all sweetness and light” and then “something changed, he snapped”. Bridge also commented in a letter to the HMRC officer that she “did not give a damn about Mrs Potts.” We all know that it can be hard work dealing with HMRC in the modern world but calmness is recommended!
Accept that HMRC use standard letters
Most of us would prefer to receive letters from HMRC signed by a named officer with a direct telephone number and a local address. Unfortunately, those days are long gone. The best approach is to look at each standard letter and work out the best way of moving an issue forward.
Keep a written record
I recently dealt with a case where the HMRC officer got completely bogged down with a repayment VAT return submitted by a client and kept saying that “everything is under control”. But the written log I kept of all the delays and conversations with HMRC meant I could put forward a strong case for a 5% repayment supplement to be paid to my client when it was finally sorted out and the overpaid VAT was repaid.
Don’t forget the HMRC manuals
I recently wrote about the important role played by the VAT manuals, which provide more detail than the public notices and are the favoured source of information for HMRC officers. If you have a technical dispute with HMRC, try to support your view with relevant extracts from the manuals as well as quoting from the public VAT notices.
Avoid comments about personality
Bridge referred to the Potts family as a “law-abiding and kind couple” and, according to the judge, made “constant references to the Potts’ virtues.” As a former Customs and Excise officer, I can assure you that such comments are a waste of time: as they say on the popular TV programme Dragons Den “it’s all about the numbers”.
The key message from the Potts case is that advisers need to stay in touch or stay out of the tax world. This is not to say we all need to slave away for 50-hours a week plus working weekends, but that a strategy must be in place to keep abreast of latest tax developments and changes as they affect our clients.
To give the final word to Judge Thomas about Bridge: “We suggest that after reflection he should consider, should any contentious issues of this sort arise in relation to any of his clients, whether it would be better to pass them on to someone closer in touch with current practice in that field.”
Finally, looping back to the judge’s comments in the fourth paragraph, do any AccountingWEB members remember what “Back Duty” was all about? It’s a new phrase for me!