HMRC VAT helpline providing erroneous advice

HMRC’s VAT helpline and repayment verification team has been giving out questionable advice recently, suggesting possible overstretch and training deficiencies.

With dealing with consequences of Covid-19 and preparing for Brexit, HMRC resources are understandably stretched at this time.

Recent queries

4 Eyes Ltd has been concerned by reports of wrong advice given to accountants recently by both the VAT telephone helpline service and staff dealing with VAT repayment returns. The accountants felt uncomfortable about the answers given and therefore made further checks.

Four examples

  1. VAT group registration: In this instance, the first officer contacted said that VAT registered business can keep the same VAT number if it forms a VAT group with other companies. This is not correct. A VAT group is always given a new VAT number, with the individual members deregistering the day before the new registration takes effect.


  1. Flat rate scheme: The officer said that grant income had to be included in the flat rate scheme calculations because the scheme applies to all business income. This is partly correct: exempt and zero-rated income is included, but not income that is outside the scope of VAT. Most grant income is outside the scope because it does not relate to a specific supply of goods or services.


  1. VAT and property: HMRC enquired into a repayment VAT return submitted by a property developer. The claim related to input tax claimed on the purchase of a pub, which will be demolished and new residential apartments will be built for sale (zero-rated) on the site. The officer asked the accountant why the developer had not avoided being charged VAT on the property purchase by completing form VAT1614D and giving it to the seller. The answer is because a VAT1614D is only relevant when a building is going to be used or converted into dwellings, it is not relevant when the building being purchased is to be demolished.


  1. Option to tax: The final one is bizarre. The officer told the accountant that if a seller has opted to tax a property, then the buyer must also opt to tax a property as a condition of claiming input tax. This is not correct: input tax claims depend on the use of the building and not whether the buyer has opted to, ie wholly taxable use of the building means input tax can be claimed. The officer changed his approach when challenged and said that it was HMRC’s “informal policy” that a buyer should always opt to tax if the seller has opted.

Alternative sources of information

4 Eyes Ltd advises taking independent professional advice where you are not sure of the applicable VAT treatment. Your advisers will be able to relate the advice specifically to your business requirements and circumstances. Please contact us if you would like to discuss any VAT issues.

Where you do contact the HMRC helpline and intend to rely upon the advice given, then always be sure to take the reference number and make a file note of who you spoke to with date and time. If you do not agree with the advice then 4 Eyes Ltd provides expert second opinion.