HMRC Gets Tough on VAT Appeals

VAT AppealsLast year just 48% of businesses’ appeals against HMRC VAT decisions were upheld by the tax man’s internal review teams.

This is a fall against the previous year’s figure where, in 2011, 60% of VAT appeals were upheld.

According to accountants UHY Hacker Young this amounts to a toughening up on HMRC’s appeals process.

Tax disputes, late payment and late filing of tax usually result in penalties from HMRC and the internal review teams re-examine these issues when businesses appeal against them.

HMRC’s internal review teams’ purpose is to resolve tax disputes in a quick, efficient and low-cost manner.

Tax Reviews usually take around 45 days and any business that disagrees with the outcome can then take their grievances to a tribunal.

HMRC internal review teams intention is to reduce the number of appeals the go to a Tax Tribunal.

Simon Newark, VAT partner at UHY Hacker Young, said:

"We were very pleased with the approach that HMRC took to internal VAT reviews when the system was first set up in 2009. HMRC dealt with reviews on a case-by-case basis and looked carefully at businesses’ claims. However, recent anecdotal evidence suggests that this approach has begun to change. The drop in successful reviews appears to support this."

Despite the reduced rate of successful appeals, Newark added that it is still worth businesses taking their time to review a VAT decision that they disagree with;

"Particularly for smaller businesses, there is a tendency to assume HMRC’s decisions are correct. As the statistics show, there is still an almost one-in-two chance that seeking a review of a VAT decision would be successful. It’s worth a try if you have solid grounds for your argument."

Newark did, however, warn against any fall in standards of HMRC’s internal review process, saying that this would be damaging to small and medium-sized businesses who might be negatively affected by the cost of a tax tribunal.

"There is often a lot of scope to challenge an HMRC VAT decision, but many businesses can’t afford to go down the formal appeal route to a tribunal. This was one of the key reasons behind setting up the internal review process in the first place."

If you need further advice see the HMRC’s website for issues regarding VAT enquiries.

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