VGROUPS08600 | VAT avoidance - groups of companies statement of practice on the new Schedule 9A VATA 1994: if HM Revenue and Customs suspect VAT avoidance

If HM Revenue and Customs believe a VAT avoidance scheme has been implemented then, save where fraud is also suspected, a HM Revenue and Customs officer will discuss their concerns with the taxpayer and invite an explanation as to whether or not, for example, a particular transaction falls outside the powers under the commercial purpose test.

If HM Revenue and Customs are subsequently satisfied that a direction and assessment should be made, then their intentions will be set out in a pre-direction letter against which the taxpayer can ask for an internal review. In taking a decision in any one case, HM Revenue and Customs will consider all relevant circumstances including the appropriate form of direction and its future effects. Where more than one remedy is available, HM Revenue and Customs will be prepared to adopt the taxpayer’s preferred option providing this does not impose an increased administrative burden (and, obviously, the loss from the avoidance scheme is still neutralised).