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Your business is likely to be registered for Value Added Tax (VAT) with the HM Revenue and Customs (HMRC). If so, the HMRC can, in certain circumstances, decide to de-register your VAT registration number. This can have severe consequences for your company, leaving you unable to issue invoices with tax included and being unable to claim back input tax for your business. Therefore, knowing what to do is essential if you are in a dispute with HMRC. This article will explain VAT de-registration and how to dispute an HMRC decision by appealing it.
Why Might HMRC De-Register My VAT Number?
The HMRC has to have a legal reason, per the Value Added Tax Act 1994, if it de-registers a company’s VAT number. If you find that your VAT number for your business has been deregistered, you should seek legal advice. You are likely to find that HMRC has de-registered your VAT number for two specific reasons. These reasons are because, after investigating:
- the HMRC believe you no longer have taxable supplies; or
- a Commissioner thinks that the main reason you registered for VAT was to enable you to commit fraud on the VAT system.
This fact sheet outlines how your business can manage a dispute.
How Do I Dispute an HMRC Decision to De-Register My VAT Number?
If the HMRC de-registers your VAT number due to suspected fraudulent activity or intentions, they must prove that fraud did occur, as this is a serious accusation. They also need to confirm that your business knew or should have known that fraud was taking place.
You can decide to dispute your de-registered VAT number in two main ways, and we explore these below.
1. The HMRC Appeal Process
A likely avenue to dispute a decision is to follow the HMRC appeal process. You have 30 days following the decision to appeal it. If you choose this route, you must give HMRC notice in writing, using their appeal form or following their instructions. These can be found in the decision letter. However, you should seek legal advice from an experienced lawyer and ask them to do this on your behalf. An appeal will initially result in HMRC either:
- standing by their initial decision;
- making some changes to their decision; or
- agreeing with your assessment.
However, if you still disagree with HMRC’s decision, you can move on to the second stage of their appeal process. This includes:
- Requesting or being offered an internal review by an HMRC officer different to the one who decided to de-register your VAT number.
- Where this still does not result in an agreement, appealing to an independent tribunal.
An internal review requires the HMRC to follow a statutory process to check if the original decision was made within its guidelines. This procedure has strict timelines and guidelines, and almost half of the HMRC internal reviews have prompted a change in its decision on the disputed tax issue.
If the review has been completed but you are not satisfied with the outcome, you can further appeal to the First-Tier Tax Tribunal. You must also appeal within the legal time limit, or else your claim is time-barred. The First Tier Tax Tribunal is independent of the HMRC and aims to act reasonably and justly. They do this by:
- looking at your evidence and the HMRC’s evidence; and
- considering previous decisions the tribunal has made, also known as case law.
2. Judicial Review
Depending on the circumstances of the de-registration of your company’s VAT number, you may be able to review the decision judicially. Judicial review is a legal process where you request that a judge in legal proceedings review the decision’s lawfulness. However, it is important to note that you are questioning whether the decision was made in line with legal requirements or duties rather than appealing the actual decision or its outcome.
For example, if the decision is highly disproportionate, you may raise that it was not compatible with the Human Rights Act 1998 and judicial review may remedy your situation.
Importantly, you must request judicial review promptly. This time limit is within three months of being able to make a judicial review claim on the decision.
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Key Takeaways
Having a registered VAT number can be an important part of running your business. As a result, you should be aware of avenues to dispute an HRMC decision if it decides to de-register your company and VAT number. Two key dispute pathways include:
- going through the HMRC appeal process, which includes an initial written appeal, internal review and potentially a first-tier tribunal appeal; and
- applying for judicial review of the decision.
If you need help understanding de-registering for VAT and how to dispute an HMRC decision, LegalVision’s experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
In short, no. The HMRC must have some type of legal reasoning, as in laws such as the Value Added Tax Act 1994, to do so. If you believe this is not the case, you may have grounds to appeal the decision.
The HMRC appeal process begins with you giving notice to appeal the decision in writing, which must be done within 30 days of receiving the decision. Then the HMRC will respond. If the response is still dissatisfactory, you may elect to request an internal review and as a final step, appeal to a first-tier tax tribunal.
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