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HMRC ‘loses 60% of VAT penalty appeals’

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According to law firm Pinsent Masons, HMRC ‘admits that it loses 60% of the VAT penalty cases appealed by businesses’ and that ‘HMRC dealt with 30,345 appeals from businesses over VAT penalty notices issued during the 2011/12 tax year [with] HMRC’s penalties [being] cancelled in 18,317 of these cases.’

Jason Collins, head of tax at Pinsent Masons, explains: ‘HMRC is operating under a lot of pressure to increase its revenues across the board, but this pressure is particularly acute in VAT. The NAO report highlighted the huge difference between the VAT HMRC believes it should be collecting, and the amount it actually does receive.’

However, a HMRC spokesman told Tax Journal: ‘Only a small proportion of the millions of decisions HMRC makes each year are challenged. The review and appeal system provides a quick and easy way to resolve disputes. Where we change a decision, it is often because our customer has given us new information: for example, a reasonable excuse for their tax return being late, or fresh evidence to support a claim.’

The report HMRC’s Reviews and Appeals: 2011/12, from where the statistics above originate, states that: ‘The number of decisions cancelled on review represents a small proportion, less than 4%, of the total number of surcharges issued.’