HMRC VAT Rulings – How reliable are they?

It was interesting to hear from HMRC representatives at the recent British Universities Finance Directors Group (BUFDG) Tax Conference that whilst they have employed over 15000 new tax specialists in the last 2-3 years there is the recognition that these new staff – trying to get to grips with the complexities of VAT across various, diverse sectors from Travel, Finance, Education and Property – have not always given the “correct” guidance.

We could have a debate as to what they mean by the “correct” guidance, of course. We’ve seen a situation where, after full disclosure and a rational argument as to the justification of the application of the zero rate to a supply of recladding on residential property, the written response from HMRC agreed that zero rating could apply. However, nearly 2 years later, contact from HMRC arrives stating that the decision was “erroneous”.

Clearly, there’s a conversation to be had with HMRC on the technicalities of the VAT legislation and case law – which is on-going – but this reversal of views of “recladding” projects appears to be cropping up across the UK – it’s not an isolated case. We received a call from a property lawyer in the South East requesting help for a large corporate client who’d received a similar letter from HMRC.

The wider sensitivities of recladding on blocks of flats are well known, which adds a further – non VAT technical element to the approach that HMRC are taking on this matter, no space for sentiment in tax we appreciate. But the broader question is the ability for any tax payer to be able to rely on rulings received from HMRC.

If you’re in a similar situation in this regard, then we’d be interested to hear from you – indirecttax@xeinadin.com

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