Tax Advice – Don’t Settle for Verbal Information
Tax is a complicated issue. It’s not always obvious which rate or type of tax is applicable to a particular transaction. The Tax Office understands that businesses frequently have tax questions that they need to have answered as quickly as possible so it has set up telephone helplines for taxpayers, each of which focuses on a specific tax area such as VAT or Corporation Tax.
The problem is, the tax advice given by these helplines is not always accurate. You may rely on verbal tax advice from a helpline advisor, only to discover that, on inspection, the Tax Officer takes a very different view and charges you a penalty for making an incorrect declaration. This certainly is possible, and two recent cases show that it is the business who loses out where there are differences between the tax advice they received from the helpline and the Tax Inspector’s decision.
Case 1: In case one, a company was exporting soft drinks to Poland through a third party company. The advice from the VAT helpline was that the exported drinks would be zero rated for VAT. However, the VAT Inspector decided that the drinks should have been standard rated as the third party company was not EU VAT-registered.
Case 2: In the second case, a company hired a privately-owned residential property out for various functions, some of which ran over a number of days. The advice from the VAT helpline was that the hire of the property would be VAT-exempt as it was not a commercial property. But the VAT Inspector determined that the hire of the property was similar to a short-term holiday let or hotel booking so the standard rate of VAT applied.
In both of the above cases, the company could not prove exactly what facts had been given to the helpline, or the exact nature of the tax advice that had been given by the helpline. If they had written confirmation of the tax advice they had received, it is likely that the outcome would have been different.
If you require tax advice for your business, contact a professional tax accountant before reaching for the HMRC helplines. If you act on incorrect tax advice from one of these lines, it may well come back to haunt you!