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Tax is a complicated issue. It can be hard to decide what the correct type or rate of tax should apply to a specific transaction. The Tax Office appreciates that businesses very often have questions regarding tax that they need to be answered urgently, so it has set up a number of telephone helplines, 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 act on information given to you verbally by a tax helpline, only to discover that, on inspection, the Tax Officer takes a very different view and charges you a penalty for making an incorrect declaration. Unfortunately, this problem does occur, and two recent cases have revealed that it is the taxpayer who suffers if there is a discrepancy between the tax advice the helpline gave them and the opinion of the Tax Inspector.

Case 1: In case one, a company exported soft drinks to Poland via a third party company. The VAT helpline advised the company that the exported drinks would be zero rated for VAT. However, the VAT Inspector decided that a standard rate of VAT should have applied to the drinks as the third party company was not EU VAT-registered.

Case 2: In case two, a company was hiring out a privately-owned property for various functions, some of which lasted several 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 decided that the hire of the premises was similar to hotel accomodation or short-term holiday lettings so VAT should have been charged at the standard rate.

In both of the above cases, the business was unable to prove exactly what facts had been presented to the helpline, or the exact details of the tax advice the helpline had given them. If they had written confirmation of the tax advice they had received, then the outcome for the taxpayer could well have been very different.

If you require tax advice for your business, contact a professional tax accountant before dialling a HMRC helpline. If you act on incorrect tax advice from one of these lines, it may well come back to haunt you!

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