Relevant 30 day period: reasonable enquiry time
When calculating the total time taken to authorise a repayment HMRC is allowed to exclude time taken to make reasonable enquiries to verify the return or claim. Section 79(4) VAT Act 1994 states that the enquiry time:
- begins when we first consider it necessary to make an enquiry, and
- ends when we are satisfied that we have received a complete answer to the enquiry.
This means that a reasonable amount of time may be taken to check responses received to our enquiries and those enquiries are not limited to those put to the taxpayer. Time may be taken to cross-check the responses against our records if necessary, or where appropriate those of other businesses. Section 79(4) also provides that the enquiries do not necessarily have to be made of the taxpayer submitting the return or claim. Therefore you are able to make other enquiries such as for example seeking policy advice where necessary, but you should always make it clear in your request for advice that a repayment is pending approval.
Support can be found in tribunal decisions Purple International Ltd LON/02/1139 and Future Components Ltd TC00412 (2010) for this approach.
VATRS04100 advises that the relevant 30 day period consists of calendar days (not working days) and it is reasonable to assume that this includes weekends and public holidays. However in the case of McGreevy Construction Ltd LON/04/1572 the tribunal took account of the fact that the Easter holidays and departmental privilege days occurred during the period of enquiry:
‘that on the facts of this case the inquiry was a reasonable one and that, in the context of a holiday period, it had been reasonably carried out’
It is therefore not unreasonable to include weekends and public holidays as part of reasonable enquiry time where appropriate when determining the 30 day period.
The principles of reasonable enquiry time apply equally to section 33, 33A, 33B and 33C claims as they do to VAT repayment returns. However most enquiries related to VAT repayment returns will be initiated as a result of the pre-repayment credibility system.
In all circumstances the RS clock should:
- be stopped when you first make contact with the trader, and
- started again when the officer who carried out the enquiry is satisfied that a complete answer has been received.
Disputes over the calculation of enquiry time are the most common reason for traders appealing against our refusal to pay RS. We must be able to show that enquiry time has been calculated fairly and reasonably by keeping records of all action taken and by updating Electronic Folder (EF) at all stages.
You must document all stages in the handling of claims and pre-repayment credibility queries from receipt to approval of the completed query. You can find more information about dealing with pre-repayment credibility queries in VATRS03600.
If it is necessary to contact the trader you should stop the RS clock and begin counting enquiry time from the day that contact is first made.
If contact by telephone is proving difficult you should send a letter by first class post explaining the exact position, that is the nature of your enquiry and the fact the repayment will be withheld until you are satisfied you have a complete answer, and follow this up within 10 working days if no reply is received. We can then reasonably say that contact was made on the day after the letter was sent.
Any unsuccessful attempts to contact the trader should be recorded but will not usually be counted as enquiry time (except in cases where we can show that the trader has been deliberately uncooperative, that is trader delay).
Irrespective of whether you make initial contact by telephone, letter or a visit you must advise the trader that their repayment will not be authorised until you have fully verified it. It is important to do so in the event the trader should appeal against the refusal to pay a repayment supplement.
You must specify the action you intend to take in relation to the return or claim and set a timetable by which specific information must be provided. If you do not receive the specified information by the date requested you must contact the trader again within 5 working days of the previously given deadline. Failure to do so may count as HMRC delay. Any unjustified delay to your enquiries or requests for information may be excluded from reasonable enquiry time and could result in a liability to repayment supplement.
Note: Do not consider a message left on a telephone answering machine as initial contact with the trader; the message might not reach the intended recipient. You must confirm any messages you leave for the trader in a letter and send it by first class post. It is then reasonable to consider that contact has been made on the day after your letter is sent.
Enquiry time ends and the repayment supplement clock re-starts when the officer raising the query has received the answer and is satisfied that no further enquiries are necessary.
Any departmental delay during the enquiry process cannot be counted as reasonable enquiry time.
You can find more information about deductible reasonable enquiry time in VATRS04300.
When approving the pre-repayment credibility query on EF or TRUCE Workbench the countersigning officer, usually a Senior Officer or above, must:
- state whether or not there have been any departmental delays, and
- where appropriate, quantify the period of departmental delay.