‘If a Customs & Excise officer, with the full facts before him, has given a clear and unequivocal ruling on VAT in writing or, knowing the full facts, has misled a registered person to his detriment, any assessment of VAT due will be based on the correct ruling from the date the error was brought to the registered person’s attention.’
Withdrawal of concession
However, in Revenue & Customs Brief 15/09 HMRC announced that this concession was being withdrawn from 1 April 2009. HMRC now have a page on its website detailing a Statement of Practice giving the circumstances in which taxpayers can rely on advice received from them.
How does it work in practice?
In practice what might happen is that you get a VAT inspection that uncovers an error. You say that on the last inspection you asked about that point and the inspector told you how to treat the supply and you have followed that advice – so how can it now be wrong! They say that there is no record of the advice in the previous officer’s visits report so he will issue an assessment for the under-declared VAT.
You feel aggrieved by this and find out how to complain about this treatment. Your first surprise is that you cannot appeal a misdirection case to the Tribunal. You firstly write to the Complaints Unit detailing all of the facts and say that you were only following the advice from the last VAT inspector. After about six weeks you get a reply saying there is no record of the advice so the assessment stands. The next step is to ask for a reconsideration of this decision by the head of the Complaints Unit. After another eternity you get a reply supporting the assessment.
The next stage is to refer the matter to the Adjudicator – an independent person - for review. This process takes at least a year and at the end of the process you get a long letter explaining why HMRC are correct and that your case does not qualify as misdirection.
Practical Tip :
How can you help yourself? The system is strongly weighted in favour of HMRC but there are some things you can do to protect your position.
Make sure any VAT queries you have are asked by a senior person who understands the issues. Before the VAT inspector comes, write down the facts and the question. Then during the visit note the date and the name of the VAT inspector and if he asks for further guidance from a colleague and the answer given. Agree the action to be taken and get the inspector to confirm his advice in writing. At the very least write down his advice and ask him to sign it to confirm that he has read it and agrees it was correct.
In between visits you may have queries so if you phone their helpline make a note of the reference number given for the call and note down the advice that was given (best not to use the helpline for anything but the simplest of advice!). You can write to HMRC, but in most cases they will not give any actual advice but just refer you to the relevant published guidance. Even so, keep copies of all correspondence and note your interpretation of the issue based on what little advice HMRC has given.