I get no pleasure from writing blogs about this subject, but here I am again. Yet another situation where somebody has been given incorrect advice from HMRC because the officer didn’t know enough about the subject. This is the third time in the past couple of months that I’ve seen this sort of thing and I know that these aren’t isolated incidents.

HMRC’s advice MUST be correct

Anyone who reads this blog regularly knows that I have a lot of respect for HMRC employees, most of them work hard and do their best to give sensible and correct information to taxpayers. So the purpose of this blog is NOT to criticise any individual. And at a time when HMRC has to be alert for businesses seeking to reduce their VAT liability by abusing the rules, officers can be forgiven for giving very cautious advice. One of HMRC’s primary functions as a government is the protection of the revenue, ie the money that the government collects and spends on our behalf running the country. With the current economic climate, it’s important that the treasury doesn’t loose any more money.

But at this time, it’s equally important that HMRC provides a service that ensures taxpayers receive accurate advice from its officers.

This most recent example concerns a DIY Housebuilders claim where the claimant, a private individual, was unable to sell their existing home and had to consider leasing or selling the new property instead. As a VAT consultant, 99.99% of my work is advising businesses, so over the 30 years of my VAT career, I’ve probably only ever been involved with a handful of DIY Housebuilder claims and freely admit that my experience at dealing with such claims was limited (until this past month, during which my experience has increased significantly!). The claimant was told that they shouldn’t submit a claim if they were even considering using the property for a “business” activity, because the claim wouldn’t be considered in such circumstances.

Not just misleading, but WRONG advice

Now this is wrong. Claims in such cases are normally allowed (limited “business use” can be ignored in most cases), but to know this you have to dig into the HMRC manual, not the information given on the claim form and explanatory notes. I suspect that the VAT officer who advised the claimant wasn’t even aware that there was any such guidance within the department’s manuals, so there wasn’t any intention to mislead. But here we have a member of the public doing the correct thing and asking for advice from HMRC and receiving advice that, had they followed it, would have cost them over £5,000 in VAT that they are entitled to claim. I wonder how many other DIY Housebuilders have been put off claiming because of receiving such advice.

I don’t know what else to say. Just another example of HMRC giving not only misleading, but INCORRECT advice and as a result taxpayers, who fund the system, loose out. I know that these situations are still the exception rather than the rule but there do seem to be an awful lot of them. HMRC insists on calling us “customers” rather than taxpayers and as a “customer”, I’d have to say that the service the department provides has some serious flaws and needs to be sorted out. As a taxpayer, I’d say it is appalling.

Potential penalties?

I always like to qualify comments such as these by accepting that I’m only giving one side of the story and in the case mentioned above – as with any similar situation – I appreciate that HMRC may have a different interpretation of events. But the fact that such things occur on a regular basis suggests that their system isn’t fit for purpose as it’s clear that officers don’t have the level of knowledge needed to give correct information. This indicates a lack of care in administering the tax that would surely qualify HMRC for a penalty for repeated errors if they were a business. Furthermore HMRC don’t seem to have any intention – never mind any procedure – to notify taxpayers if they, i.e. HMRC, make a mistake that goes against the taxpayer. Surely this would constitute a failure to disclose?

I’m looking forward to the weekend. Have a good one!

Marie