The first full year figures are now available for the outcomes of the new statutory optional internal review process which HM Revenue & Customs (HMRC) introduced on 1 April 2009. These show the contribution the review process is making to resolving disputes. Just over half of HMRC's penalty decisions and a third of other disputed decisions which were subject to review were varied or cancelled.
Most review requests come from unrepresented taxpayers disputing a penalty for filing their tax return late and the penalty was withdrawn or reduced because taxpayers provided evidence that they had a reasonable excuse for late filing.
You can find more information about penalties and reasonable excuse by clicking on the links below.
Tax return deadlines and penalties
Penalties for mistakes and delays with your VAT
Non-penalty cases now account for a quarter of the reviews completed. This reflects a large number of requests for review in February and March of the requirement to file VAT returns on line (see below for more information about this requirement and some case studies).
New review requests received 30,530
Total number of reviews completed 25,348
Unrepresented by an agent 20,675 (81 per cent)
Agreed time limit extensions 647 (4 per cent)
Upheld: review complete 4,144 (60 per cent)
Deemed upheld: review time limit expired 25 (0 per cent)
Varied 477 (7 per cent)
Cancelled 2,217 (32 percent)
Upheld: review complete 8,432 (46 per cent)
Deemed upheld: review time limit expired 53 (0 per cent)
Varied 842 (5 per cent)
Cancelled 9,158 (50 per cent)
VAT registered traders with a turnover in excess of £100,000 (and those who newly register) are required to submit their VAT returns on line and pay any VAT due electronically. This requirement does not apply to businesses subject to an insolvency procedure or those run entirely by practicing members of a religious society, whose beliefs prevent them from using computers.
In February over one million notices were issued to businesses requiring them to register. At 31 March 3,044 traders (or their Agents) had asked HMRC to review the decision and in around half of these the decision was withdrawn.
In some cases, in the absence of the latest VAT return, estimates of turnover had to be applied. Where a review request was submitted with actual turnover showing it was below the £100,000 threshold the decision was cancelled.
The following case studies show how review of decisions requiring businesses to submit VAT returns on line can work.
The customer received a letter saying that, from 1 April 2010, VAT returns must be filed online and payments made electronically. A review was requested on the grounds that the turnover was less than ₤100,000 and that the business has no computer, the trader no IT skills and that there was no Broadband available.
The review officer confirmed the turnover was well in excess of the threshold. The customer was informed that they were therefore required to file on line and make payment electronically. There are very few grounds for exemption and these do not include not having access to or being able to use a computer. The review officer's letter explained that Broadband is not necessary to use HMRC on line services as they work with dial up and set out what support options we have made available to enable customers to fulfil their filing obligations.
The customer requested a review of the requirement to file on line, saying that the business turnover was less than the threshold of ₤100,000.
The review officer checked the trader's records and the return for April 2009 indicated a higher than usual turnover. The reviewer asked for a copy of the paper return for that period and realised that there had been a scanning error - the customer had included a comma between the figures that was rather large and this had been read as the figure one rather than a comma. The decision was withdrawn once the correct turnover was confirmed.
Previous case studies, on a wider range of topics, can be found here;
