Beware of tax helplines

The Taxman’s telephone helplines do not always give the correct answer.  There have been two recent cases where a verbal assurance from a telephone helpline was not later accepted by a Tax Officer who then raised a penalty for the incorrect tax treatment.  You, the taxpayer, suffers where there is a disagreement between the helpline advice and the Tax Inspector.

Case 1: In the first case Corkteck Ltd exported soft drinks to Poland through a third person: Sintra SA. The VAT helpline told Corkteck that the exported drinks would be zero-rated for VAT. However, the VAT Inspector decided the drinks should have been standard rated as Sintra SA was not registered for VAT within the EU.

Case2: In the second case Acrylux Ltd hired out a private residential property for various functions, some of which lasted several days. The VAT helpline told Acrylux that the hire of the property would be exempt from VAT as it was not a commercial property. However, the VAT inspector said the hire of the property was similar to short-term holiday lettings and VAT should be charged at the standard rate.

In both cases the taxpayer could not prove exactly what facts had been presented to the helpline, or exactly what the helpline had given as its advice. If the advice had been requested in writing the outcome for the taxpayer may have been different. If you have a tax question, please ask an accountant (we recommend using Chartered Accountants) before reaching for the HMRC helplines. If you act on advice that later proves to be incorrect, you could pay a high penalty!