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HM Revenue and Customs Brief 24/11


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Issued on 7 July 2011

Withdrawal of Business Brief 28/04 item 2 issued 25 October 2004

VAT - correcting liability errors made by HMRC

Business Brief 28/04 item 2, 'VAT - correcting liability errors', will be withdrawn with effect from 1 August 2011. This withdrawal is to take account of the announcement concerning the VAT Misdirection Extra Statutory Concession 3.5 on 1 April 2009 in Revenue & Customs Brief 15/09. This is available on the HM Revenue & Customs (HMRC) internet site at Revenue & Customs Brief 15/09.

Revenue & Customs Brief 15/09 confirmed that HMRC is bound by incorrect advice only in the circumstances explained in 'When you can rely on information provided by HM Revenue & Customs (HMRC)'. This is available on the HMRC internet site at When you can rely on information or advice provided by HM Revenue & Customs (HMRC).

Taxpayers will usually only be required to apply the new interpretation of the law from a current or future date that HMRC will announce when advising on the correct interpretation.

If, following HMRC's announcement of its new interpretation of the law, a business nevertheless chooses to correct historical errors, HMRC will accept the corrections providing all of the following conditions are met:

  • all past errors are corrected
  • the neutrality of the tax is respected
  • the business is no better off and the Exchequer no worse off than they would have been if the mistaken interpretation had not been made

As explained in Business Brief 28/04, taxpayers will not usually be required to register in respect of previous supplies they had treated as exempt based on HMRC's interpretation of the law at the time of supply.

For example, a court rules that supplies previously regarded by HMRC as exempt were, and had always been, liable to VAT. HMRC would not usually require businesses affected by such rulings to register for VAT in relation to taxable supplies they made prior to the court decision. Businesses that choose to register for periods prior to the binding court decision on liability must satisfy the normal rules for VAT registration. They must also apply correct accounting procedures, including those for exempt supplies and associated input tax restrictions. They must also be able to submit supporting calculations and evidence any input tax deductions.

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Article Published/Sorted/Amended on Scopulus 2011-07-12 11:20:01 in Tax Articles

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