BLOG 108

NO, THEY HAVE NO SHAME!

People are always saying to me, “Surely HMRC’s behaviour in this case has been so embarrassing that they won’t want to take it to the Tribunal.

I generally explain that if HMRC have a choice between foregoing tax and being publicly embarrassed they go for the embarrassment every time.

The First-tier Tribunal case of McMullen Holdings is a good example.

McMullen applied through its accountants, Moore Stephens, to register voluntarily for VAT on 8 April 2008. They did not receive their VAT registration. Moore Stephens called HMRC. They then called again, and again, and again … Moore Stephens say that most of the calls were unanswered. On some occasions the call was answered; on those occasions the person who answered said that he wasn’t dealing with the matter but someone would call them back. Guess how often they were called back? That’s right, nil times! Moore Stephens wrote to the Registration Unit on 1 September 2008 asking when their letter of 8 April would be dealt with. Further telephone calls ensued, again either unanswered or eliciting an unfulfilled promise to call back.

On 6 April 2009 Moore Stephens submitted a second application for registration with a covering letter recounting the above history and saying that the company no longer wanted to register voluntarily; they were now required to register as their turnover had exceeded the registration limit. This galvanised HMRC into action. They registered the company for VAT with effect from 1 April 2008.

They also said that they had no knowledge of either of the letters of 8 April 2008 or 1 September 2008 and had never had a single phone call from Moore Stephens. As far as HMRC were concerned the company had applied for registration nine months late and were liable to a penalty of £4,936.

Moore Stephens pointed out that they had had a similar problem in registering with another client in 2009-2010 and HMRC had written to Moore Stephens in response to a complaint on that client, “Unfortunately your client’s application had been misfiled and has not yet been found by the Wolverhampton registration team. I am very sorry that you were promised call backs from a number of caseworkers within the registration team and they failed to do so”.

HMRC also admitted that the Joint VAT Consultative Committee (the minutes of which are on public record) had been expressing disquiet about problems with VAT registration from sometime in 2008.

The Tribunal were therefore faced with having to decide between HMRC’s claims that they record everything meticulously and were confident that they had received not a single letter or phone call prior to 6 April 2009, and Moore Stephens’ evidence that they had written twice and phoned constantly during that period. Who was to be believed in circumstances where it was well known that HMRC had major problems with the registration system and had admitted in another case that the registration office had lost letters and not kept promises to phone?

Not really surprising that it preferred the Moore Stephens version! But surely very surprising that HMRC insisted that the Tribunal should be called upon to decide between the two conflicting stories in circumstances where they had already put on record that their registration process was unreliable at the time concerned. (It is much improved now!).

ROBERT MAAS