Can you rely on VAT advice?

When you telephone the H M Revenue & Customs National Advice Service, are you relying on the advice that you are given? Moreover do you expect that H M Revenue & Customs will allow you to continue to rely on that advice ?

In tax parlance, it is recognised that a taxpayer has a “legitimate expectation” that if they are given advice by H M Revenue & Customs, having first provided them with all facts pertinent to an enquiry, they are entitled to rely on that advice.

It is also a common perception that if that advice turns out to be incorrect and is subsequently overturned to the taxpayer’s detriment, that an Appeal may be made to the Tax Tribunal in an attempt to seek redress.
Correct? Well, yes and no!

In the case of Mr Abdul Noor he went to his local VAT Office and there he spoke with the National Advice Service with regard to the most appropriate time to register for VAT. He had with him a number of invoices for professional services he had received before registering. He was told that he could reclaim the amounts when he registered. He was apparently not told that a claim may only be made for VAT incurred on services incurred up to 6 months prior to registration and was not told to register straight away to reclaim this VAT. He registered more than 6 months later. Subsequently, HMRC disallowed the VAT in question.

Mr Noor Appealed to the Tax Tribunal. The Tribunal found that he had a “legitimate expectation” that the VAT may be recovered based on his discussion with the National Advice Service, even though the legislation did not permit such a recovery. HMRC Appealed this decision to the Upper Tribunal, on the basis that the Tax Tribunal has no jurisdiction to hear a case based on a taxpayer’s “legitimate expectation” unless directed to do so by the High Court. The Upper Tribunal agreed and dismissed the Appeal. The correct course of action, it said, is for a taxpayer to seek Judicial Review in the High Court –(which can be very expensive!)

The Upper Tribunal went on to say that the National Advice Service is there to provide general advice and not to provide rulings. The fact that HMRC had subsequently dis-allowed the VAT did not result in an “abuse of power”.
So, what does all this mean?

Well, in essence, be very careful what you rely on if telephoning the National Advice Service for advice! In addition, do not expect HMRC to necessarily be “fair and reasonable” if the legislation allows them to adopt a different position to that which they originally took.

Finally, if you want a Court to consider whether HMRC has acted “reasonably” rather than simply within the law, your only recourse appears to be Judicial Review at the High Court.

This case simply reinforces the fact that you can’t beat specialist advice when dealing with complex areas of taxation like VAT. Our dedicated team include ex-HMRC VAT Inspectors and are here to ensure you get the correct up to date advice on all areas of VAT and taxation. Call us today on 0845 177 5500 or contact us online

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