Independent VAT Consultant
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HMRC: Pay the VAT before we refund you


HMRC rejected a taxpayer’s hardship appeal over a disputed VAT assessment, although the company was owed significant tax refunds in other taxes. 

5th Jun 2020
Independent VAT Consultant
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In the last few months, there have been a number of VAT tribunal cases where, to put it bluntly, HMRC seems to have ‘gone for gold’ by raising massive VAT assessments against fairly small businesses.

These assessments have usually been raised on the basis of the HMRC officer’s ‘best judgment’ (s73(1), VATA1994), often where accounting records have been lacking in key areas, mainly for cash traders.

Pay before hearing

For disputes concerning direct tax (eg income tax, corporation tax) the tax at stake can usually be deferred until the dispute is resolved, although this is not the case where an accelerated payment notice (APN) has been raised. Under the indirect tax rules (eg for VAT) the taxpayer has to pay the assessment before the appeal can be heard at the first-tier tribunal (FTT).

Hardship grounds

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Replies (5)

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By frankfx
06th Jun 2020 10:14


Another excellent article looking at the practical issues.

One must be concerned that the impositions to prove hardship may be inequitable and abuse of power.

But HMRC may feel that too often the taxpayer is playing a game.

Really emphasises the mantra:

"Get it right ( Vat return) first time and everytime."

Thanks (0)
By Ian McTernan CTA
08th Jun 2020 11:32

This goes to show how disjointed our tax system is, when you can be owed £34k by one branch of HMRC and yet HMRC cannot balance the company's overall account with HMRC and insist on payment of an assessment which might not even be right.

If only we had a more modern system (like Ireland, for example) where there are not loads of different numbers for the same company, and a company has an overall account with HMRC and you can offset different taxes easily.

Thanks (4)
By Al G McC
10th Jun 2020 11:39

Hi I believe it is possible for a taxpayer to request HMRC offset one tax against another - I don't think it's a formal procedure but I will stand correcting but historically when in practice we had a client who paid his VAT into his CT Account and eventually after too mant calls HMRC CT accepted a letter of authorisation from the client and the CT folk transferred the paymemnt to his VAT account - not sure if this helps or not!

Thanks (0)
By dgilmour51
10th Jun 2020 11:43

Its an outrage, really.
The artifice of 'separate accounts' within HMRC is fundamentally a convenient fiction to enhance the possibility of the tax proxies of fines and penalties.
Its a bit like saying that NI and RoadTax are not part of 'General Taxation'.
If stuff was really ring-fenced then there might be vestigal excuse - otherwise its just another offensive (sic) strategem.

Thanks (0)
By Malcolm McFarlin
10th Jun 2020 12:29

I have very little sympathy with the Appellant. I have never had a HMRC hardship application refused by HMRC with the tribunal cases I have had to deal with. I'm surprised the Appellant was not able and willing to provide this evidence with regard to a £6K assessment particularly when one weighs up the cost of taking a case to a tribunal hearing.

I'd be interested to know what the client's agent charged for this service which included being present at the hearing.

The client received poor advice in my opinion.

The VAT repayments appear to have been withheld by HMRC for a specific reason which is not clear in the judgement although they could have been offset if HMRC were satisfied they were genuine claims.

Thanks (1)