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Tax is a complex subject. It isn’t always clear 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 dealing with specific areas of tax such as VAT or the Construction Industry Scheme.
The problem is, the tax advice given by these helplines is not always accurate. You may accept verbal tax advice from a 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 show that it is the business who loses out where there are differences between the tax advice given by the helpline and the decision made by the Tax Inspector.
Case 1: In the first case, a company was exporting soft drinks to Poland through a third party company. The advice from the VAT helpline was that a zero rate of VAT would apply to the exported drinks. However, the VAT Inspector judged that a standard rate of VAT should have applied to the drinks as the third party company had not been registered for VAT within the EU.
Case 2: In the second case, a company was hiring out a privately-owned property for various functions, some of which ran over a number of days. The VAT advice helpline told them that the hire of the property would be exempt from VAT because it was not commercially-owned. But the VAT Inspector ruled that the hire of the premises was similar to hotel accomodation or short-term holiday lettings so the standard rate of VAT applied.
In both of the above cases, the business was unable to prove exactly what facts had been given to the helpline, or exactly what the nature of the tax advice given by the helpline had been. 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 have a tax question, get in touch with a professional tax accountant before discussing it with one of the tax advice helplines. If you act on tax advice that later proves to be incorrect, it could prove expensive for your business!
