Ambiguity of HMRC letters to change
Sadly Steve Allen died in July 2011. His wife Leah would like to thank all those who know Steve and helped contribute to his success. She has recommends Steve's clients and anyone who is interested in this article topic to contact Rob McCann from “The Vat people” on (tel) 0161 477 6600 . Please make reference to Steve Allen.
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In a recent VAT Tribunal case, we lodged an appeal on behalf of our client,
PTE Plc t/a ‘Physique’ (MAN/08/0265 – VTD 20,722), against the imposition of a
default surcharge of nearly £20k for the submission of a late return for the
period 11/07. We were successful in the appeal, and the penalty was removed on
the grounds that the company had a ‘reasonable excuse’ for sending in the return
The background to the case was that in early 2007, PTE had a number of staff
changes in its accounts department and reorganised its business. By early
October, it became apparent that it would not be able to complete its 11/07 VAT
return by the due date. The company sent a fax to HMRC on 11 October 2007
explaining the situation, and stressing that it wanted its current return period
changed to a December end, and that all future returns would end December, March
etc as it was not able to complete the return on time due to the pressure of
On 2 November, HMRC replied saying ‘This has now been approved and your VAT
returns will now end on the last days of…’. Not unreasonably, the client
considered this to be agreement to the change, particularly as it had made it
clear that it needed the change in the current period in order to get the return
in on time. The company did not take much notice of the rest of the letter,
which said: ‘Before this change becomes effective you may receive a VAT return
under the old arrangements. If this happens you must complete the return and
send it to …’. Doing this, of course, would have completely negated any benefit
from changing the VAT return stagger.
The client received the 11/07 return as usual, and a one-month return for
December 2007. It naturally threw away the November return, and assumed that the
December return was for 4 months. It filled it in, and sent it on time for what
it thought was a four-month period. HMRC replied ‘oh no, we want two returns and
the November one was late so we will impose a penalty for a late return’.
Similarly ambiguous wording was responsible for two Tribunal appeals in 1995
and 2001, which HMRC also lost. The Tribunal Chairman expressed concern that,
despite this, HMRC had still not changed the wording of these letters, and the
meaning was still unclear.
Quoting, the Chairman said:
‘We do not see why it should be the duty of a taxpayer to make inquiries as
to the meaning of a letter which the Commissioners have written, just in case
there should be some hidden ambiguity in it. The Commissioners should be taken
to mean what they say; it is, in our judgment, up to them to say what they mean’
Not surprisingly, in this case, the client’s appeal was successful.
Tip. There are two main points to take from this case. Firstly, if you
do ask for a change of VAT stagger, you should always complete any outstanding
returns, even if the authorisation letter seems to make it clear that the change
is current rather than from a date in the future. Secondly, if HMRC continues to
produce ambiguous letters with unclear meaning, you may have a reasonable excuse
for your mistake and avoid a penalty.
It must be hoped that HMRC will now take the Tribunal’s advice onboard and
change the wording of these letters, so that their meaning is clear and these
misunderstandings do not happen again in the future.
About the Author
Steve Allen is the
Director of VAT Solutions (UK) Ltd, an established independent firm of Chartered
Tax Advisers, formed by Andrew Needham and Steve Allen. Both not only are
respected tax advisers, but have worked for both Customs & Excise and one of the
top four accountancy firms for many years. This mean that their team know both
sides of the equation and are truly experts in this field.
The company has a cross-section of clients from multi-national companies
through to medium-sized and numerous smaller regional firms of accountants and
solicitors. They produce a regular publication 'VAT Voice', which can be
downloaded directly from their website
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Article Published/Sorted/Amended on Scopulus 2008-09-23 11:30:48 in Tax Articles