Items of post can go missing at this time of year, but when the letter is from HMRC this may have serious consequences for the taxpayer.
If HMRC has a letter to a business returned to it as undelivered, its new policy is to mark the trader as “missing”. This flag means the trader’s VAT record is frozen and it is unable to submit VAT returns until the “missing” flag is lifted. An unincorporated business will also have their self-assessment account frozen, and won’t receive any SA demands.
No doubt HMRC believes it is protecting the national revenue by taking this action, as fraudulent traders can reclaim large amounts of VAT and then disappear. However, before setting the “missing” flag HMRC doesn’t contact the business by an alternative route, such as by phone or email, or even attempt to contact the tax agent.
If our client is flagged as “missing” the first we may know about it is when we can’t submit your VAT return, as no VAT return has been “issued” by the system.
It can take some time to resolve this mess as we need to call HMRC to confirm the client’s address, and our client may have to contact HMRC directly.
In the meantime, the filing of one or more quarterly VAT returns will have been missed so the next VAT return may have to cover six or nine months. This should not generate penalties as the missed VAT returns were not “issued” during the period the VAT account was frozen.
Written by the Tax Advice Network