November 16, 2022


I see HMRC has published updated guidance setting out the process for dealing with VAT disputes. This prompted me to comment on both the guidance and our experience in assisting clients.

Where HMRC has made an Appealable decision in relation to VAT the Taxpayer can either Appeal direct to the Tax Tribunal or ask HMRC to review the decision. Asking for a review does not prevent the Taxpayer from lodging a formal Appeal if HMRC upholds the original decision, provided the Taxpayer submits the necessary paperwork within strict time limits.

HMRC undertakes that any review will be carried out impartially by a specialist ‘review officer’ who works in a separate Unit to the visiting Officer teams- HMRC’s Solicitor’s Office and Legal Services directorate.

A review should be conducted more quickly and at less cost than a formal hearing before a Tax Tribunal. This is particularly helpful if the dispute can be resolved by providing further evidence not previously seen or otherwise taken into account by the Officer.

If the dispute is over an interpretation of the law, and the Officer’s decision is in line with HMRC’s clear policy, a review is not likely to change HMRC’s decision. However, asking for a review first may still serve to clarify the issues in dispute.

Where HMRC are seeking both tax and a penalty, it is possible that HMRC’s penalty determination could be excessive, so even if the underlying tax is legally due a review may be of some benefit in mitigating (or removing) any penalty.

Key points and takeaways

  1. Many accountants offer a Tax Investigation/Fee Protection service- e.g. tax-investigations for the costs of handling VAT Disputes (and HMRC Investigations generally) and we recommend you consider obtaining cover for your business.
  2. HMRC does make errors or get hold of the wrong end of the stick, so it is important to obtain an objective (but sympathetic) opinion on the scope for disputing adverse HMRC decisions.
  3. Your Appeal and Review rights are subject to time limits, typically 30 days from the date of the disputed decision (e.g., the issue of an Assessment.) You should not delay taking action.
  4. You or your adviser also need to follow due process, particularly if an Appeal to the Tax Tribunal is required.
  5. HMRC will not normally seek to collect payment of disputed tax while the matter is under review. If the dispute is the subject of a formal Appeal to the Tax Tribunal, any VAT in dispute must in principle be paid before the Tribunal can hear the Appeal. However, if payment would cause undue hardship the taxpayer can apply to waive this requirement.
  6. Interest will accrue during the review or Tax Tribunal process on any disputed or unpaid tax until it is paid.
  7. Once HMRC have made a decision it can be difficult to persuade them to change their minds. Consider taking advice early to try and avoid getting to a position where a decision has to be disputed.


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