The HMRC website states the following: “If you can’t find the answer to your question on the HMRC website, the quickest and easiest way is to ring the VAT helpline where you can get the most of your VAT questions answered.”
So you’d expect that if you ring the helpline, you should be able to get an answer to most of your queries and that you should be able to rely upon the advice given. You’d also expect that if the officer can’t give you an answer over the telephone, you will be asked to put your query in writing. Either way, you should end up with a ruling that can be relied upon. You’ve made the approach to HMRC and been honest and open with the facts and therefore you should be able to rely upon the advice you receive.
HMRC, however, don’t always see it that way. A recent VAT Tribunal case, (TC01209 Abdul Noor) concerned whether or not a newly registered business should be able to recover VAT on certain pre-registration expenses. In his case, the expenses related to services received more than 6 months prior to registration (VAT recovery is normally limited to services incurred in the 6 months prior to registration) and he’d gone to his local VAT office to ask for advice about whether he could recover the VAT and when he should register.
As local VAT offices don’t deal with general VAT enquiries any more, he was directed to call the helpline service and spoke to an officer there who confirmed that he would be able to recover the VAT in question.
Now we all know that advice was incorrect, but Mr Noor had done the sensible thing and gone to HMRC for advice and believed that he had the right answer to his query.
Relying on a “legitimate expectation”
No record of the call was made by HMRC and Mr Noor did not have any details of the individual who gave him the advice. HMRC subsequently assessed for the VAT claimed “in error” and said that Mr Noor couldn’t rely on the advice he’d received from the helpline service as there was no record of the call. The Tribunal, however, agreed that he had a “legitimate expectation” that he should be able to rely upon the advice he received and upheld his appeal that he should be able to recover the VAT.
This is a very interesting ruling, although I suspect that HMRC will argue that it doesn’t establish a precedent and refuse to be bound by it. But it will be interesting to see whether it can be used to support similar situations in the future and you may want to think about whether or not you or your clients have lost out because HMRC have refused to rely on such “verbal” advice.
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VAT Helpline: a source of general advice rather than binding rulings?
However the important thing as far as I’m concerned was the comment by HMRC’s counsel that the VAT Helpline (or National Advisory Service as referred to in the case concerned) “was only a source of general advice rather than binding rulings”.
Well that’s a surprise to me. And, I’d guess, to most of you. I’d always thought that if you ring the Helpline and give full information about the business and the VAT issue involved, you could rely on the advice given by the officer. What’s the point of having a “helpline” if you can’t rely on the advice you get from it?
Get it in writing!
So how do you protect yourself in these situations? How should you protect yourself?
This is what I do. If it’s a simple query – eg what are the latest exchange rates or where do I send my option to tax form, then I’d call the helpline for the information, but make a brief note of the conversation with the officer’s name for reference purposes.
When it comes to more complex stuff, I’ve always recommended that you should put any important queries in writing so that you get a response in writing.
But how do you define what’s important? Well that depends on a number of factors that are for you and/or your client to decide, but I tend to fall back on the following main factors:
- If the guidance given in the relevant VAT notice is unclear or doesn’t cover your situation;
- If the amount of VAT involved is significant and the potential VAT cost loss would hit the business’s bottom line
- If the amount of VAT isn’t significant but it’s a repeating situation – eg lots of low value transactions – so that the bottom line would be affected by the VAT cost in the longer term
At the end of the day, the issue is whether you can afford the potential VAT cost if you don’t invest the time and cost in getting a ruling. That’s the decision that you have to make.
Marie
18 July 2011