COVID 19 Impact – Compliance Reviews restart but HMRC offer more Time & Reasonable Excuse criteria
HMRC have an Information Sheet which they are issuing to taxpayers where they were in the process of a VAT compliance review as “lockdown” started. In it HMRC advise that they will:
“now continue with the compliance work we told you we had put on temporary hold.”
There is a sense therefore that HMRC work patterns may be starting to return to normal therefore.
There is also the acknowledgement that the COVID 19 impact will be difficult for tax payers and as a result they advise that there will be:
- More time to appeal or ask for a review
There is normally a 30 day limit to register for an appeal or decision review but an additional 3 months will be allowed. If you are at the stage of considering an approach to a Tribunal you would normally have to register that appeal within 30 days of the decision date but it is clear that if you are now late in registering an appeal then, whilst the Tribunal centre will contact HMRC to ask if HMRC will object to the late appeal, HMRC will not do so if the appeal is lodged within the 3 months and 30 day’s timescale.
- Reasonable Excuse
There is also news on the application of a “reasonable excuse” where HMRC are looking to charge penalties in addition to recovering the tax at stake. The information sheet advises they will:
“now consider problems caused by the Coronavirus (COVID-19) situation as a reasonable excuse for missing some tax obligations, such as paying or sending us a return.”
Examples from HMRC as matters they consider would fall to be a reasonable excuse include:
“A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:
- your partner or another close relative died shortly before the tax return or payment deadline
- you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
- you had a serious or life-threatening illness
- your computer or software failed just before or while you were preparing your online return
- service issues with HM Revenue and Customs (HMRC) online services
- a fire, flood or theft prevented you from completing your tax return
- postal delays that you could not have predicted
- delays related to a disability you have”
It should be noted that normally HMRC would not regard as a reasonable excuse the fact that you relied on a third party to prepare or submit your VAT Return for you, so the question must be considered whether, if that person had the symptoms or was suffering from or self-isolating with Coronavirus, then would that now be regarded as a “reasonable excuse”?
The examples of where HMRC would consider a Covid-19 impact are also quite specific in terms of referring to missing a tax obligation “such as paying or sending us a return.” Would an error within a return also be covered if you were unwell or had staff on furlough who normally undertook the VAT return calculation for your business?
Clearly the news is to be welcomed, especially the time extensions, but the questions on the application of the “reasonable excuse” criteria will be an interesting one to follow in coming months and years.
Should you find yourself the subject of a VAT compliance review or assessment please do get in touch with your Centurion VAT team – and we’ll review the situation to establish both the basis for the assessment but also whether a challenge to the threat of VAT penalties could be considered. We are only at the end of the phone or email should you need to get in contact. An email to email@example.com will ensure a response from our team of VAT and Environmental Tax experts.
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