HM Revenue & Customs forced into U-turn

Richard Staunton, VAT Director, Francis Clark Tax Consultancy

Richard Staunton, VAT Director, Francis Clark Tax Consultancy

A tax expert is claiming victory over HM Revenue & Customs (HMRC) on business VAT regulations.

Richard Staunton, VAT Director at Francis Clark Tax Consultancy, says HMRC has changed a policy following a challenge.

And he believes there may be many businesses which could now be due a VAT refund as a result of this HMRC U-turn.

The issue revolves around the treatment of VAT incurred on goods used by businesses prior to VAT registration.

In 2014 HMRC appeared to change its previous stance and decided that only a proportion of VAT on assets on hand at registration could be recovered, taking into account use made of that asset before registration.

But now HMRC has published its Revenue and Customs Brief 16, 2016 (RCB) stating that all VAT can be recovered.

Richard said: “Although HMRC maintains the policy has not been altered, clearly, something has changed and this is somewhat of a U-turn.

“I believe that the HMRC began to interpret regulations differently and has now reverted to the previous interpretation – otherwise, why would they put out a RCB to say nothing had changed?”

Taunton-based Richard, a ten-year HMRC veteran himself, said the firm’s intervention had helped to change policy at the highest level.

The case centred on a newly-registered Devon marquee hire firm whose first VAT return was queried by HMRC’s repayment team.

This resulted in a restriction being imposed, meaning 50 per cent of a VAT claim on the purchase of a van being disallowed to reflect use before registration.

Richard added: “We felt so strongly that this was wrong that we went out on a limb and challenged HMRC at a tribunal, taking on the case with no cost to the client.

“HMRC ended the long-running dispute by backing down at the eleventh hour, but we never had a satisfactory explanation for the withdrawal until the new RCB was published more than six months after their withdrawal from the tribunal.

“The RCB, by stating that all VAT can be recovered, now returns much needed sanity and clarity to the issue.”

Julie Towers, VAT Partner at PKF Francis Clark said: “We are proud we took the case on for the taxpayer and it shows that HMRC can be made to see sense when they make mistakes, even at policy level, although it can take some time.”

Richard believes there may be tens of thousands of businesses unaware that the policy allegedly changed and was then changed back.

He said: “If you or someone you know have had pre-registration VAT disallowed you should now be able to reclaim that VAT back and be repaid any penalties incurred.

“If this does apply to you we would urge you to contact HMRC as soon as possible or speak to a tax adviser or expert.”

www.fctc.co.uk/

Note to Journalists:

About PKF Francis Clark

Chartered accountants and business advisers PKF Francis Clark has annual revenue of £38 million, a team of more than 580 people and 59 partners. Founded in 1919, the award-winning firm has eight offices across Cornwall, Devon, Dorset, Hampshire, Somerset and Wiltshire. PKF Francis Clark is a member of PKF UKI which is ranked 11th in the Accountancy Age 2016 survey of top accountancy firms.

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