Relevant 30 day period: deductible reasonable enquiry time
It is important that all actions taken to verify a claim are carried out as quickly as possible and an up to date audit trail of all relevant documents and actions recorded on Electronic Folder. This audit trail of documents and actions is crucial as the information may be needed where a trader who has been refused payment of repayment supplement (RS) appeals to a tribunal.
The following are examples to help your decision making:
1. Several unsuccessful attempts are made to contact the trader by telephone
You should send a letter to the trader by first class post as soon as it becomes apparent that the trader cannot be reached by telephone. Your letter must refer specifically to the repayment being withheld and you should:
- confirm why the repayment is being withheld,
- confirm that the repayment will not be authorised until we have fully verified it, and
- request a response within 10 working days from the day after the date of the letter.
You should stop the RS clock and start to count reasonable enquiry time from the day after the letter is sent. (It is reasonable to say that a first class letter to a local address will be received the day after posting.)
If the trader fails to respond to your letter within 10 working days, you should consider taking the action set out in 2 below.
2. You are unsuccessful in commencing the enquiry because the trader has failed to respond to your telephone calls and letters
Consider disallowing the input tax in accordance with the guidance in VSME28000.
3. You telephone the trader’s premises but the appropriate person is unavailable and you leave a message asking them to call you
You should not stop the RS clock when the message is left because it does not count as initial contact; you can’t be sure that the message will reach the intended recipient. Make sure, however that you record the action you have taken and the name of the person you left the message with. You must tell the person you speak to how important the call is and ask that the appropriate person calls you back within 2 working days.
If after 2 working days you have not received a reply you should call again. If the person you need to speak to is still unavailable you must put your request in writing taking the action set out in 1 above. If the trader does not respond to your letter within the timescales set out in 1 above you should consider taking the action set out in 2 above.
4. The trader is contacted and asks for the visit to be postponed until a more convenient time (for example two weeks later)
You should stop the RS clock when the trader is first contacted - in this example the delay has been requested by the trader. You should make it clear that the repayment return is being withheld until the visit can take place and the return can be verified.
You should confirm in writing that the visit has been rearranged as per the trader’s request. Your letter should confirm the date of the rearranged visit and that the repayment will not be authorised until all enquiries have been completed and the return has been fully verified.
- The trader is contacted and asks for the visit to take place very quickly, but this cannot be accommodated
When first contact is established, the RS clock is stopped. The trader may request the visit to take place very quickly, for example on the same day or within the next couple of days; every effort should be made to accommodate the request. If however a shortage in resources means the traders request cannot be accommodated for more than 7 working days, this may be considered HMRC delay and so the RS clock should be restarted on the day the visit is booked until it takes place, unless other enquiries are actively being pursed at the time. The trader shouldn’t be penalised for HMRC’s lack of resources. An audit trail still needs to be kept of the efforts made to accommodate the trader’s request.
In allowing the appeal by Alliance & Leicester plc  VATDR240 the tribunal chairman observed that:
‘the obligation of processing a return within 30 days is not imposed on an individual officer, but on the Commissioners. If they are to avoid being required to pay repayment supplement, they must devote sufficient resources to the processing of returns in that timescale.’
The message is clearly that HMRC has a collective responsibility over the verifying of repayment returns and claims within 30 days; it is not the responsibility of any individual.
6. A visit takes place but the trader delays producing the necessary evidence to support the claim
Deadlines by which information is expected should always be given to the trader during the visit.
You should contact the trader promptly and within 2 working days of the deadline to check on progress and record details every time you make contact and receive any response. The RS clock will be stopped (apart from any HMRC delay) from the date of first contact until the person conducting the enquiries is satisfied that a complete answer has been received.
7. The visit takes place but it is necessary to ask a policy team for advice before you can be satisfied with the validity of the claim, or
The visit takes place but it is necessary to contact another officer or trader to verify the evidence supplied
The RS clock should be stopped on the date of first contact with the trader, and should not be restarted while advice is sought or enquiries are made elsewhere, see VATRS04200.
You should explain the situation to the trader in writing. Your letter must refer specifically to the repayment being withheld and that it will not be authorised until it has been fully verified. You should set a reasonable deadline for the second departmental enquiry to be resolved by and then liaise with the policy team or officer dealing with your enquiry to make sure that it is dealt with promptly. It is important to ensure the team or officer dealing with your enquiry is aware of the potential consequences of any delay in answering your enquiry.
The clock will restart when the complete answer to the query is received back by the person conducting the enquiries into the return or claim, and that person is satisfied with the answer. Any departmental delays (such as delays in resolving enquiries internally) cannot be included in the total enquiry time. You must quantify any departmental delays when you close the case.
- The trader supplies the information requested but it is complex and takes some days to review
As explained at VATRS04200 section 79(4) VAT Act allows reasonable enquiry time to continue until we are satisfied we have a complete answer to our enquiries. Therefore a reasonable number of days taken to review the information supplied may be recorded as reasonable enquiry time, provided that the case is being actively worked on each day. The number of days depends upon the amount and complexity of the information received in response to the enquiry.
9. During the verification of a queried repayment return further returns are also queried
Any subsequent repayment return received after a repayment credibility enquiry has been started must be dealt with separately. If an enquiry is needed to verify the return you must again tell the trader that the return is being withheld and will not be authorised until you have verified it.
If a visit has already been arranged you should tell the trader that both/all the returns will be verified on the visit. You can then start to deduct days for reasonable enquiries on the newly notified returns, that is, stop the RS clock in respect of the subsequent return(s).
Note: If subsequent returns are not examined, the RS clock cannot be stopped.
You should then either approve the subsequent return or make further enquiries. If you decide that the subsequent return can be approved, this action must be taken immediately rather than waiting for the outstanding pre-repayment credibility query to be resolved. Failure to do this could attract a liability to RS.
10. There is information available to verify the return without the need to contact the trader
You should not stop the RS clock, but see VATRS04400.
11. Before the pre-repayment credibility query is raised the period in question has been examined during an assurance visit
You should not stop the RS clock because the query could be answered by information already available locally, but see VATRS04400.
12. The local office decides to approve the return straight away and verify it later, because a visit has already been arranged for the near future
You should not stop the clock because no contact has been made with the trader about the return.
13. The local office contacts the trader and arranges a visit for a date in the future (for example. in 4 weeks time). The local office then decides to approve the return straight away
You should not stop the clock because no further information has been obtained as a result of contacting the trader.