VAT: How to reduce form processing delaysby
Some key VAT forms are currently getting held up by significant delays. Neil Warren explains what accountants can do to reduce the likely processing time.
There is no doubt that HMRC’s VAT support services are under pressure; we accept that. But there are occasions when problems are being caused by accountants not being completely clear about which forms to complete in particular situations, or how to complete them. This can create further delays and queries.
The HMRC website says: “online applications take around 20 days… print and post applications take up to 30 days.”
My recent experience of reviewing applications for accountants is that confusion can occur with dates.
Be clear that there is always only one compulsory registration date. There might be scope to register before this date on a voluntary basis, but not after this date. I saw one draft VAT1 form where the business went over the £85,000 turnover threshold in the 12 months to 31 July 2021, but incorrectly wrote down 1 October 2021 rather than 1 September 2021 as its registration date.
I got involved with a query when an accountant asked HMRC to deregister a client on 31 March 2021 on the VAT7 form, on the basis that annual sales had fallen to less than £83,000 in the previous 12 months due to the pandemic. The form was submitted in August 2021 and HMRC rightly refused the request to deregister because the client was still trading.
A trading business can only deregister from a current or future date. The situation got very confused and HMRC took a long time to communicate with the accountant. Again, be clear about dates.
Forming a new VAT group
To register a new VAT group, the relevant forms to complete are: VAT1, VAT50 and VAT51. HMRC has recently simplified procedures by merging the latter two forms into one, which is helpful.
The other challenge is to also submit VAT7 deregistration forms for any members of the group which are VAT registered in their own right before joining the group. In other words, a condition of joining the group is that a business must give up its standalone registration. It’s a bit like a footballer transferring to a new club – you can’t play for two teams at the same time.
Option to tax
There is often a last-minute panic when a client is buying a commercial property with a tenant in place and needs to opt to tax the property with HMRC as a condition of a transfer of going concern (TOGC). This is because if the seller has opted, the buyer must opt as well.
There are two important issues here:
- HMRC’s quoted time to deal with option to tax elections is 40 working days. This working days condition in practice means eight weeks. It is a waste of time posting or emailing form VAT1614A and marking it as “urgent”.
- The TOGC requirement is to be able to prove to the seller that the election has been made – not that it has been acknowledged in writing by HMRC. The tax department now encourages sellers to make the election by emailing [email protected]). This route makes it is easier for the seller to prove the election has been made and meet the TOGC requirement before exchange of contracts.
Finally, don’t forget that an election can only be backdated a maximum of 30 days from the submission date unless a taxpayer can prove it was made before this date. In other words, the decision to opt was made more than 30 days ago, but just not notified to HMRC on the relevant form.
In my view, HMRC’s form VAT652 is the best way to notify error corrections. A letter is fine as an alternative method, but using the form reduces the risk of omitting important information and therefore delaying processing times. The form is also completed online and printed out at the end of the process – it is very user-friendly.
Hopefully the gradual return to the office for HMRC staff after the pandemic will reduce processing delays.
It is still a good idea for advisers to do thorough checks of all VAT forms or ask a colleague to review them before sending them to HMRC.