News

March 28, 2013

HMRC gets tougher on VAT appeals

Over half of all reviews of VAT decisions are now rejected by HMRC according to the national accountancy group, UHY Hacker Young.

Just 48% of businesses' appeals against HMRC VAT decisions were upheld by HMRC's internal review teams last year, far lower than the 60% of appeals upheld the year before, raising concerns that HMRC has toughened its approach to the appeals process.

HMRC's internal reviews re-examine VAT decisions imposed on businesses in relation to tax disputes and the late filing or payment of tax.

The purpose of the internal review process is to resolve tax disputes quickly and cheaply, reducing the number of disputes that go to the Tax Tribunal. Reviews take around 45 days, and businesses that disagree with the outcome can then take their dispute to 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."

However, despite the fall in successful appeals, it is still worth seeking a review of a VAT decision that seems wrong, said Newark. "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."

However, any decline in the standards of the internal review process, said Newark, would hurt businesses that may not be able to afford the cost of a 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."