Opinion: The HMRC VAT Registration Helpline set to Close - Impact on Businesses

HMRC has announced that it has closed its VAT registration helpline from 22 May 2023, giving only five days’ notice. This decision – communicated with very little advance warning - has only served to highlight ongoing frustrations with HMRC’s processing of new VAT registration applications.

HMRC has announced that it has closed its VAT registration helpline from 22 May 2023, giving only five days’ notice.  This decision – communicated with very little advance warning - has only served to highlight ongoing frustrations with HMRC’s processing of new VAT registration applications.

Taxpayers have been advised to use the “Where’s my reply” online service as a substitute for the telephone helpline, but only after allowing 40 working days (ie eight weeks) from the date of application, if HMRC have not responded by this time.

Over the past couple of years, businesses and clients have expressed increasing concerns about the mounting delays at HMRC's registration unit. For many years HMRC’s performance in this area had generally met expectations.  More recently, however,  HMRC's extended processing periods have created significant problems for a number of taxpayers and their advisers, leaving them in a state of limbo.

The uncertainties surrounding VAT registration can in some instances go beyond mere irritation to having more significant consequences, creating uncertainty around matters such as VAT accounting practices, import processes, contract negotiations, and overall business operations.

In this blog, we delve into the issues caused by the delays at HMRC's registration unit and explore the need for a proactive approach to address the underlying problems.

The Alarming Consequences of Delays

In the past, HMRC generally processed new VAT registration applications within a week or so, providing businesses with a clear understanding of their VAT status.

However, the current delays have left clients awaiting a VAT number in a state of uncertainty, particularly where registration is sought on a voluntary basis, such as a new business start-up. Without a VAT number, some businesses are unsure how to properly account for VAT, including how to properly invoice their customers in the meantime and collect amounts from them to cover their VAT liability.

Moreover, the delays can hinder important business activities such as making imports and entering contracts (such as where being registered for VAT is a requirement of a customer’s procurement process), leading to missed opportunities and potential financial setbacks.

Lack of Accessibility and Frustration

The announcement that there is no longer a facility to telephone HMRC to check on progress only adds to the sense of uncertainty and frustration, reminding many of previous instances when HMRC closed their phone lines for a time to clear backlogs in correspondence.

Limiting the ability to chase up matters only exacerbates the existing problems and fails to address the underlying issue at hand.

The Need for Prompt Processing

While HMRC must of course undertake checks to guard against fraud and incorrect registrations, it is crucial to balance this against the time-sensitive nature of VAT transactions. VAT is a "here and now" transactional tax, requiring efficient processing of new VAT registration applications.

Businesses rely on timely registration to comply with tax obligations and maintain smooth operations. Therefore, it becomes imperative to focus on reducing processing times to ensure that the VAT system operates effectively.

Internal Challenges in Communication

From HMRC’s perspective the rationale for ending telephone access is that 85% of all calls received are from taxpayers or advisers chasing news of the progress made with new applications.  Closing the helpline is designed to free up a significant amount of staff time to actually deal with applications.

However, personal experiences highlight the challenges faced by businesses when communicating with HMRC. Emails sent to HMRC's central inbox may encounter delays in being allocated to officers responsible for processing applications. This lack of efficient communication can on occasion result in prompt email replies from businesses being ‘lost’ in the system and not acted upon.

HMRC's suggestion of waiting for a full 40 working days before chasing matters therefore seems excessively long, raising concerns about lost documents and further delaying client matters.

Unfortunately, on occasion registration applications do seem to become ‘lost’ by HMRC within their system. As an adviser submitting a VAT registration application on behalf of a client can you really be comfortable with the notion of waiting a full eight weeks before being allowed to check online that the application has been received by HMRC and is being processed?

Final Thought

The delays at HMRC's registration unit have become a pressing issue for some businesses and their clients. The uncertainties caused by these delays can in some situations have far-reaching consequences, affecting proper VAT accounting, import processes, contract negotiations, and overall business operations.

Instead of limiting the ability to check on progress, it is crucial to address the underlying problem of extended processing times. It remains to be seen whether introducing an initial eight week ‘period of silence’ with no ability to check with HMRC on their progress with applications will succeed in restoring the sort of acceptable processing times that were experienced as recently as 18 months or so ago.

Timely processing will not only alleviate frustrations felt by many with this aspect of VAT but also ensure the smooth functioning of businesses and maintain confidence in the tax system.