Tag Archives: tax-clearance

VAT: Updated guidance – Non-Statutory Clearances Service

By   21 July 2022
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HMRC has published new guidance on the non-statutory clearance service available for all businesses and their advisers.

Non-Statutory clearances

A Non-Statutory clearance is a mechanism where a person can ask HMRC in writing for guidance or advice in certain circumstances. The guidance sets out how to use this procedure. The service is limited, however, and HMRC will only advise if the applicant:

  • has fully read the relevant guidance or contacted the relevant helpline
  • has not been able to find the information required
  • is uncertain about HMRC’s interpretation of tax legislation

However, HMRC will not respond if

  • it is not given all the necessary information —checklists at Annex D (for VAT) provide details of what is required
  • it does not think that there are genuine points of uncertainty – it will explain why HMRC think this and direct the applicant to the relevant online guidance
  • if  HMRC think the clearance request is to give tax planning advice, or to approve tax planning products or arrangements
  • the application is about treatment of transactions which, in HMRC’s view, are for the purposes of avoiding tax
  • HMRC is checking the applicant’s position for the period in question, in which case queries must be directed to the officer dealing with the inspection
  • it is a clearance on matters of fact, such as if certain activities constitute a business
  • there is a statutory clearance applicable to the relevant transaction

HMRC is currently not dealing with postal applications, so a request must be sent by email to nonstatutoryclearanceteam.hmrc@hmrc.gov.uk

HMRC will usually reply within 28 days, but say where difficult or complicated issues are involved it may take longer. If this is the case, HMRC will acknowledge a request and tell the applicant when they can expect a full reply. VAT non-statutory clearance requests are currently taking around 12 weeks to process.

Appeal

There is no general right of appeal against advice given by HMRC, except where rights to appeal are set out in statute.

Appeal rights are usually against decisions HMRC take, such as issuing an assessment for underpaid tax or a penalty.

However, some VAT related decisions are classed as ‘appealable decisions’ by statute. The letter HMRC sends will explain if the applicant is able to appeal and what to do if the applicant disagrees with a VAT decision.

Relying on HMRC advice

There has been changes to such reliance, set out here. HMRC explain when its advice is not binding here.

VAT – How to apply for a non-statutory clearance

By   16 December 2020
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One would think that it would be a relatively straightforward matter to write to HMRC to obtain a ruling (non-stat clearance) on a matter. Surely a taxpayer ought to be able to set out the issue, describe the transaction, provide a tax analysis and ask HMRC whether they consider the proposed VAT treatment appropriate. Well, of course, it is not as simple as that (this is VAT after all).

So, what are the issues and what hurdles must be cleared before HMRC engage with a written query?

Checklist

First, there is a checklist which a business must consider and include in a non-stat clearance. Inter alia, this list includes:

  • Information about the transaction(s)
  • The reasons why the business is undertaking the transaction
  • The relevant facts about the transaction, set out chronologically as transaction steps,
  • The answer sought – set out your view of the tax consequences of the transaction
  • Any details that are contingent, eg; on future events or the consent of others
  • Information about commercial background
  • Explain the significance of the tax result in achieving the desired outcome
  • Explain why you chose this form of transaction over another that could achieve the same commercial result, where you have considered alternative forms
  • Information about legal points
  • Outline the specific legislation at issue
  • Why you believe the application of the legislation is open to possible different interpretations, summary of those different interpretations, and why the tax consequences are uncertain, including reference to our published guidance or to case law
  • Any legal advice you have already received, and you are content to disclose
  • Details of how you intend to use the clearance, such as for public documents
  • Information about the disclosure of a tax avoidance scheme that covers all or part of the transaction

Failure to address any items on the checklist usually means no determination will be forthcoming.

An applicant must also set out what HMRC guidance (including internal guidance) legislation, case law and other information has been considered. We find it helpful to reproduce the full checklist (as HMRC advise) and provide a comprehensive response to each point in order to avoid a straightforward refusal to respond.

Genuine uncertainty

One of the main reasons HMRC refuses to provide a non-stat clearance is that it considers that there is no genuine uncertainty; in other words, “go and look at the guidance”. This is very unhelpful after time and effort, and fees cost has gone into the application. The fact that an application is required to set out what guidance etc has been considered, and why it is ambiguous in the relevant circumstances does not seem to carry very much weight. I find it is unhelpful to say, “if it wasn’t uncertain, we wouldn’t be writing to you”! We recommend that a full explanation of the genuine uncertainty is provided to forestall such a HMRC refusal to reply.

Chances

Experience insists that it is difficult to obtain a non-stat clearance which is of any value. Quite often, HMRC will reply saying that their letter is not a non-stat clearance, but then go on to address (at least) some of the issues. This sometimes provides a degree of comfort. An approach that I sometimes adopt is to say, “we believe this to be the correct VAT treatment, and one we will apply to the transaction unless you advise otherwise with reasons”. This sometimes creates a reaction.

HMRC guidance

Details of obtaining a non-stat clearance here.

Address

I find that applications are looked at quicker if they are emailed: nonstatutoryclearanceteam.hmrc@hmrc.gsi.gov.uk. However, there is a 2mb size limit which is often unhelpful. If emailing, an applicant should state that you confirm that you understand and accept the risks involved in using email (otherwise this can cause delays).

Postal address

HM Revenue & Customs, Non-Statutory Clearance Team, S0563. 5th Floor, Saxon House, 1 Causeway Lane, Leicester , LE1 4AA

What HMRC will not rule on

  • Incomplete information
  • When there is no genuine uncertainty
  • When they consider it planning advice, or approval of a planning arrangements
  • HMRC believes that the intention is to avoid tax
  • There is a statutory clearance applicable to the transaction
  • Whether activities constitute a business
  • Whether a transaction represents a Transfer Of a Going Concern (TOGC).

Reliance

Even if a business does obtain a determination, is it possible to rely on it? The answer is no (well, not always). I consider this here.

Summary

It is understandable that a business wants certainty on a transaction, and it ought to be able to rely on HMRC for confirmation of its own analysis, but obtaining such an opinion is fraught with difficulties, frustrations and (genuine) uncertainty. It seems that HMRC will go to lengths to avoid giving a decision, but they are not reticent in penalising a taxpayer once a business has made a decision, applied it, and HMRC subsequently disagree with the VAT analysis.

A wholly unacceptable situation.