VAT registration helpline closure: Members respond

The short version:

• HMRC announced the closure of its VAT registration helpline on 17 May, to come into effect three working days later, 22 May.
• Pre-Covid, the average VAT registration was completed within two weeks.
• The current HMRC instruction – to wait 40 working days for a response – leaves applicants waiting months, assuming nothing goes wrong.
• Members have shared their feedback about the VAT registration process’s shortcomings and the impacts on their clients.

The announcement gives taxpayers and their accountants less than three full working days to react: an extremely short window compared to the 40 working days HMRC allots itself to respond to VAT registration applications. Coupled with the temporary restriction of the Agent Dedicated Line (ADL), which is only handling calls relating to Self Assessment penalties and appeals (and PAYE coding enquiries) between 17 April and 2 June, HMRC’s ability and capacity to work with agents to help taxpayers get their tax right must be called into question.

HMRC’s justification for the closure, that 85% of calls to the helpline were chasing progress updates on VAT registration applications (anyone seeking a progress update is directed to the ‘Where’s my reply’ tool), neglects to mention the 15% of calls seeking clarification and assistance when VAT registration applications go wrong – which they too often do.

HMRC’s stated service level for VAT registration applications – that a reply should be expected within 40 working days – means that applications could be left for two calendar months, assuming nothing goes wrong and the process doesn’t experience unexpected delay. This is a far cry from pre-Covid levels, where a one-month turnaround was an outlier and the average registration application was completed within approximately two weeks.

The VAT service in general, including registration applications, continues to deteriorate post-Covid – and removing the helpline through which accountants could contact HMRC to work through the myriad issues arising seems unlikely to improve the situation, from an agent’s point of view.

IFA members provided multiple examples of unexplained delays and uncorrected errors in the VAT application process. Just three are below.

14-month delay and debt collectors

“An application was submitted to change a VAT registration number from a sole trader to a limited company. The sole trader was fully up to date with returns and payments. An acknowledgement was received, followed by an email confirmation that a response would be sent within 14 days.

“After months of chasing, an HMRC officer in the complaints department advised me that the application to transfer the number should not have been allowed as, due to an issue in the system caused by MTD, it was not possible to transfer VAT numbers. The HMRC officer assisted me, and a new VAT number was issued – 14 months after the application had first been submitted.

“Alongside the stress this caused the client, he had no access to the sole trader VAT account as he had deregistered, however HMRC VAT was issuing estimates of VAT due and instructed debt collectors.”

Confusion in VAT registration

“One of my clients went over the VAT threshold. I registered for VAT, backdated to the date he went over the VAT threshold. I received the initial acknowledgement followed by a further confirmation and a reference number for the application. After eight weeks, I emailed VAT registrations and received acknowledgement that emails are dealt with in order – I received a reply to the original email about six weeks later.

“I asked the Agents Resolution team to assist and they took on the case. It appeared that no one had worked on the registration, in fact they couldn’t even find the application number initially. We received a VAT number within 10 days of the Agents Resolution team becoming involved.

“The first VAT return was submitted, after which my client received a letter from HMRC VAT stating that, due to a refund situation, he should not be VAT registered and they were cancelling his registration unless we appealed within 14 days.

“I submitted paperwork and evidence confirming that he was correctly VAT registered, that no refund was due or had been received and that future VAT returns would result in a liability not a refund. This was sent by special delivery and signed for. I heard nothing back and, for now, we are still submitting VAT returns and making payments.”

Unidentified ‘errors’ to blame

“My client asked for VAT registration before he went over the threshold. After eight weeks, I emailed without success and rang the VAT registration applications helpline. The agent I spoke to said that it would “take as long as it takes” and would not check on the progress of the application for me.

“I posted onto the agents portal and asked for assistance. A reply was posted by HMRC that if I was not happy with the process, there was a complaints procedure to follow. I asked the Agents Resolution team to assist.

The VAT number was received approximately four months after the application first went in. I was advised that the delay was due to an error with the VAT application – when I asked for more details no one could explain. I therefore followed up with a copy of the application, clients ID, NI number, UTR number and proof of address, all of which were correct on the application.

The response was that the application was now in hand and that the error was not on my part but was due to a “known facts challenge” so there was “nothing the agent could have done as we would have contacted them regardless”. However, neither my client nor I was contacted by HMRC in this matter.

No notice, no accountability

Without the option to contact the VAT registration application helpline, accountants are left waiting up to two calendar months to learn of an issue with a client’s application – and then longer still to attempt to resolve it. In cases where an error has occurred, leading to registrations being blocked or cancelled incorrectly, this will lead to increased stress for both client and agent – and will leave accountants with little choice but to escalate VAT registration issues, passing the administrative burden from the VAT registration service to other HMRC functions and the accountants themselves.

HMRC’s rationale for closing the VAT registration application helpline, to redeploy helpline advisers to processing applications, is commendable. But accountants are frustrated with the VAT registration service level and unclear as to where they will get support to help with complex issues arising, and want to see some assurance from HMRC that this move will reduce the backlog and bring down the record-high 40 working day timescale.

HMRC could have allayed some of the concern surrounding this announcement by making it with a more realistic lead-in time, and by committing to a target improved service level to be achieved by closing the helpline – that they did not is regrettable, and contrary to the HMRC Charter commitments to responsiveness and mutual respect.

As one IFA member remarked, “I find it a great shame that we have descended from being able to have dialogue with HMRC, to a situation where it is virtually impossible”.

Matt Barton is IFA Technical Manager. 

Join Matt and IFA Chief Executive and Group Executive International John Edwards for an IFA Strategic Update, 1-2pm 24 May. 

IFA continues to represent members interests with HMRC, including on this issue, and that representation will be discussed during the virtual event. Find out more and register.