Deeks VAT Monthly Success Review 1

Client Background 

We recently assisted an elderly client who had been managing a property rental business with her late husband. Following his unfortunate passing in 2022, she found herself navigating the complexities of running the business alone. As the sole owner, she continued operating under the partnership’s VAT registration while in the process of selling the business’s only property asset. However, this transition proved far from straightforward. 

Amid the property sale and adjustments to her business, our client encountered significant complications with HMRC. These included delays in communication and changes to VAT reporting requirements under the new Making Tax Digital (MTD) system. Unfortunately, this resulted in penalties and interest charges totalling £8.5k despite her diligent efforts to stay compliant. 

The VAT Challenge 

The main challenge was managing the VAT implications following the partnership’s dissolution upon her husband’s death and the subsequent sale of the property. HMRC issued penalties for late filing, even though our client had not been officially informed that the VAT registration had been transferred into her name or that the filing requirements had changed. 

To complicate matters, HMRC sent penalty notices to her previous address, causing additional confusion and stress. These penalties felt particularly unjust, given her consistent efforts to comply while dealing with significant personal loss. 

Deeks VAT Intervention 

Our Approach 

To address the issues our client faced, we focused on building a strong case for a reasonable excuse by highlighting communication delays and demonstrating that she was unaware of the VAT transfer and new filing requirements. Despite the confusion, she continued making monthly VAT payments in good faith. A critical part of our strategy was securing the Transfer of a Going Concern (TOGC) treatment. Following her husband’s passing, the partnership was dissolved, and she became the sole owner. As the property was being sold, we advised her to opt to tax retroactively. In March 2023, we: 

• Submitted a request to HMRC to treat the property sale as a TOGC backdated to August 2022. 

• Applied for a belated notification of the option to tax to exempt the sale from VAT. 

However, securing formal confirmation from HMRC proved challenging, with responses delayed until January 2024. By then, penalties and interest had already been issued. To counter this: 

• We requested an internal review, arguing that HMRC’s delays, and lack of communication prevented timely filings. 

• Addressed filing issues by adapting to the new Making Tax Digital (MTD) system, which had caused initial confusion for our client. 

The Outcome 

Successful Resolution 

We are pleased to share that we successfully appealed the penalties and interest charges. HMRC agreed to remove all penalties and interest and cleared any outstanding VAT owed. This resolution was a huge relief for our client, allowing her to deregister from VAT and focus on her personal well-being without the stress of looming financial penalties. 

Key Takeaways 

Lessons Learned 

Effective Communication is Critical: This case underscored the importance of maintaining detailed records of all correspondence and ensuring that clients remain well-informed, especially when dealing with HMRC. 

Compassion in Client Services: Understanding the personal challenges our client faced was crucial in building a strong case. A tailored, empathetic approach can make all the difference. 

Persistence Pays Off: Navigating tax regulations, particularly under the evolving Making Tax Digital framework, can be challenging. By persisting with our appeal and demonstrating reasonable excuses, we achieved a positive outcome. 

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Louis Good

Senior VAT Specialist

louis@deeksvat.co.uk