VAT Dispute Solicitors
A VAT assessment from HMRC can run to hundreds of thousands of pounds. A solicitor with expertise in VAT law and the tax tribunal process can challenge the assessment, negotiate the settlement, and in many cases substantially reduce the liability.
VAT disputes arise across a wide range of scenarios — HMRC assessments disallowing input tax claims, disputes over whether a supply is VATable or exempt, challenges to the VAT liability of specific transactions, default surcharge and late payment penalties, HMRC carousels and missing trader fraud allegations, and disputes over the VAT treatment of land and property. The VAT rules are complex and the sums in dispute are often significant. A solicitor will analyse the legal basis for HMRC's position, identify weaknesses in the assessment, and challenge it through the HMRC internal review process and, where necessary, the First-tier Tax Tribunal.
VAT Disputes — Key Issues
VAT disputes — the situations most commonly contested with HMRC and how a solicitor addresses each one.
VAT disputes span everything from input tax claims denied on technical grounds to fundamental questions about whether a supply is taxable at all. A solicitor will identify the correct legal position and present it compellingly to HMRC and the tribunal.
HMRC VAT assessments — challenging the basis and the amount
HMRC can raise a VAT assessment where it believes the VAT return understates the VAT due — typically following a VAT inspection or compliance review. A VAT assessment must be raised within 4 years of the accounting period in which the under-declaration occurred (or 20 years where fraud is alleged). A solicitor will review the basis of the assessment — the method HMRC used to calculate the additional VAT — and challenge it where the method is incorrect, the evidence is insufficient, or the period is out of time. A business that disagrees with a VAT assessment must appeal within 30 days of the assessment or the HMRC review conclusion, or the right to appeal is lost.
Input tax disputes — reclaiming VAT that HMRC has disallowed
Input tax (the VAT paid on purchases) can be reclaimed where: the supply was made to the business for use in its VATable business activities; the VAT invoice meets the statutory requirements; and the business can produce the invoice as evidence. HMRC disallows input tax claims where it considers the supply was used for non-business or exempt purposes; where it suspects the invoice is false or associated with a Missing Trader Intra-Community (MTIC) fraud; or where the invoice does not meet the legal requirements. A solicitor will challenge the disallowance — presenting the evidence that the business had no knowledge of any fraud and took all reasonable steps to verify the supply chain.
VAT exemptions and reduced-rating disputes
Certain supplies are exempt from VAT (financial services, insurance, healthcare, education, residential property lettings) or reduced-rated at 5% (domestic fuel and power, energy-saving materials, children's car seats). Where a business treats a supply as exempt or reduced-rated and HMRC disagrees, a VAT assessment and late payment interest follows. VAT liability disputes often turn on the precise characterisation of the supply — whether the supply is a single composite supply (taxed at the rate of the principal element) or multiple separate supplies (each taxed at its own rate). A solicitor will analyse the nature of the supply, apply the relevant VAT legislation and HMRC guidance, and challenge HMRC's characterisation at the tribunal where it is wrong.
VAT and land and property — complex liability questions
The VAT treatment of land and property transactions is notoriously complex — some are exempt (most supplies of land and buildings), some are standard-rated (new commercial buildings, commercial property with an option to tax elected), and some are zero-rated (new residential construction, certain conversions). The option to tax (formerly the election to waive exemption) makes supplies of commercial property taxable — with significant consequences for the buyer's ability to recover input tax and for the VAT cost on the transaction price. A solicitor will advise on the VAT treatment of specific property transactions, challenge HMRC where it has incorrectly characterised the liability, and manage the consequence of disputed option to tax positions.
Default surcharge and VAT penalty appeals
The VAT default surcharge applies where a VAT return or payment is late — the surcharge rate escalates from 2% to 15% on repeated defaults. The VAT late payment interest and penalty regime introduced in 2023 applies a first-year default penalty of 2%, escalating to 4% after 15 days, and ongoing late payment interest. A solicitor will appeal a surcharge or penalty where the business has a reasonable excuse for the late payment or return — including: unexpected business difficulties; bank or IT system failures; a bereavement; or HMRC's own processing error. The appeal must be made within 30 days of the surcharge notice. Where the surcharge or penalty is large, expert legal representation at the First-tier Tribunal significantly improves the prospects of a successful appeal.
VAT registration and deregistration disputes
Businesses must register for VAT when their taxable turnover exceeds the registration threshold (currently £90,000 in any 12-month period). HMRC can compulsorily register a business it believes has exceeded the threshold and raise a VAT assessment for all the VAT that should have been charged and remitted. Where HMRC raises a compulsory registration assessment, the business can appeal on the basis that it did not exceed the threshold in the relevant period, or that it was entitled to the two-year look-back exception. A solicitor will challenge the basis of HMRC's threshold calculation, present the evidence that the business's taxable turnover did not exceed the registration threshold, and appeal to the First-tier Tribunal where HMRC maintains its position.