Taxpayer’s Appeal Denied: The Risks of Relying on HMRC Helpline Advice

Haines Watts VAT Associate Director Julie Green looks at the implications of a recent case involving taxpayer Gregory Sewell which underscores the risks of relying solely on HM Revenue and Customs (HMRC) helpline advice instead of seeking professional technical guidance.

The case of taxpayer Gregory Sewell highlights the dangers of depending exclusively on HMRC helpline advice rather than seeking professional technical guidance.

If you’re facing complex tax issues, don’t hesitate to reach out to our expert advisors at Haines Watts for reliable and tailored advice.

A Costly Misunderstanding

Sewell planned to construct a static caravan near his home, intending to live there while his son occupied the main house. He obtained the necessary planning permissions for the “siting of the caravan for incidental use.” Aware that Value Added Tax (VAT) incurred on building construction could be reclaimed under the DIY refund scheme, he reached out to the HMRC helpline to clarify how this applied to his situation.

An HMRC adviser informed Sewell that his static caravan would be treated as a new-build home under VAT Notice 708, specifically section 3. Despite Sewell mentioning that his planning permission was under caravan legislation, the adviser assured him that HMRC would consider the caravan as a building for VAT purposes.

Upon completing the construction, Sewell submitted a VAT refund claim of approximately £16,000 for the materials used. To his surprise, HMRC rejected his application, stating that no dwelling had been constructed and that he had merely sited a caravan.

Legal Proceedings and Tribunal Decision

Feeling misled, Sewell appealed the decision, arguing that HMRC should honour the advice given by its helpline. HMRC responded by applying to strike out the appeal, asserting that the First-tier Tribunal (FTT) lacked jurisdiction to consider his argument and that the appeal had no reasonable prospect of success.

Judge Popplewell, presiding over the case, expressed regret but agreed with HMRC. He noted that the FTT could not consider appeals based on the fairness of HMRC’s actions or any alleged misguidance but was limited to matters of law concerning tax liability. The judge mentioned that any claim of unfair treatment or legitimate expectation would need to be pursued through the very costly process of judicial review in the High Court.

Moreover, Judge Popplewell sympathized with Sewell, criticizing HMRC’s handling of the case and the absence of an apology for the misinformation provided. He described HMRC’s conduct as objectionable and raised concerns about the quality of advice taxpayers receive from the helpline.

The Importance of Professional Advice

This case serves as a stark reminder that HMRC’s helpline is not a substitute for professional technical advice. Tax laws and regulations are complex, and while helpline staff aim to provide accurate information, they may not always offer guidance tailored to specific circumstances.

Taxpayers undertaking significant financial transactions or projects should consider consulting qualified tax professionals.

Our professional advisors at Haines Watts can provide comprehensive advice, help navigate intricate regulations, and mitigate the risk of costly misunderstandings. Contact our tax specialists today for a free, no-obligation consultation to discover how we can assist you.