Why is it important to obtain specialist tax advice?
posted 5th September 2025
Whatever your own view of the news this week, it highlights the complexities of our tax system and the potential consequences of getting tax wrong. Of course, most of us are unlikely to be subject to a public outcry if we didn’t pay the right amount of tax, but would still face the financial consequences of a surprising tax bill and, most likely, a penalty of somewhere (in most circumstances) up to 30% of the tax due.
It is not uncommon for individuals and businesses to just cross fingers and “hope for the best” in tax. Although this approach isn’t uncommon, as tax advisors this alarms us, having seen what happens at the wrong end when HMRC gets involved. I would always advise businesses to take the small cost of advice now to prevent a large cost in tax and penalties later down the line.
In VAT in particular, there are many reasons why advice should be sought:
- the very slightest change in circumstances can give a very different VAT treatment. In our day-to-day role, we often see businesses describe themselves as a travel “agent” when actually they are buying and selling in their own name which gives a completely different treatment, or decide to move from selling serviced accommodation to leasing ASTs giving a very different input VAT recovery base, or starting to sell to customers located abroad meaning a potential liability for overseas VAT. Also, if anyone has ever tried to navigate the legislation on food, you will also see how adding even one ingredient can change the entire VAT treatment!
- Sometimes an optimal position can be achieved with advance planning, that can just not be achieved in retrospect. A classic example of this is the choice of opting to tax a property prior to a sale, or the circumstances of a Transfer of a Going Concern. This is also true of having contracts reviewed before agreeing them.
- The law is often just unclear or misleading, and sometimes it takes someone who has dealt with HMRC on these matters to translate what on earth the guidance is saying (Notice 709/5 anyone…?).
- Sometimes, although you may wish to reduce cost and try and find the answer on your own, it is much more expensive to get it wrong. We sadly see this more than we would like and will usually end up adding much more value than we cost, even if the value is just “being able to sleep at night”.
I would also highlight the word “specialist” – just like a conveyancer isn’t normally an SDLT specialist, an accountant is not normally a specialist in travel VAT (and I definitely wouldn’t profess to be an expert on any tax other than VAT – I have an accountant who takes care of all my taxes other than my VAT return). So, the first consideration is finding someone who fits the bill.
When should you seek advice
As VAT advisors, we of course encourage businesses to seek specialist advice sufficiently in advance of:
- Large transactions (for example the sale or purchase of a property) or before an M&A transaction.
- Changes in the circumstances of a business’s sales or purchases (for example, a change in the type of sale, type of product, location of customer, etc). Anything which is expected to be different from the norm should be reviewed.
- Conclusion of significant contracts, especially new suppliers or customers, or new types of agreement.
- Significant changes in volumes.
- Every few years for a general healthcheck to ensure that you are not missing changes in law.
What happens if you get tax wrong?
As with most VAT questions, the answer is “it depends”(!).
Obviously if you have overpaid tax, its better news and the key here is setting out the circumstances to HMRC as clearly as possible to try and ensure that the repayment of tax is received promptly.
When we are contacted by someone who believes that they have paid too little tax, or if we find an error ourselves, the first question is: is there a way for it to be fixed?
If the answer is no (which is sadly often the case), in brief what will happen is as follows:
- The tax should be quantified as efficiently as possible
- The best way of avoiding exposure and mitigating penalties is to disclose this to HMRC as soon as possible. We usually recommend writing to HMRC’s error notification team setting out in full the reasons for the error, the attempts the business has made to help HMRC in quantifying the error, and what the business proposes to put in place to make sure the error does not happen again.
- HMRC will normally ask questions and conduct some further review of the error but then raise an official assessment and consider the penalty grade.
- Assuming the error is careless and not deliberate, the penalty will usually be up to 30%. This can be mitigated if you accommodate HMRC’s review and assist as much as possible. It can also be mitigated further on discretion by HMRC and suspended if HMRC believe there is scope for hits. It is usually up to you to provide HMRC with some conditions upon which the suspension lies.
- If a penalty is suspended, there will usually be some conditions agreed which last a year or two. After this, the review will end.
- We have not dealt with deliberate tax errors before and most advisors are reluctant to do so. Deliberate errors are much more serious and can carry larger penalties, both financial and criminal. As such, we would advise that legal advice is taken for any error of this nature.
For careless errors, usually HMRC are “human” and accept that the law is confusing and that businesses are not failproof. However, HMRC do expect businesses to take appropriate advice and it is always useful when trying to defend an error if you can demonstrate that proper advice was sought.
As to the nature of the news this week, I’m going to try and stay neutral on this, but as someone who works in tax, doesn’t criticise other people for their own tax planning, and still sought SDLT advice when my own circumstances warranted, you can probably figure out where I stand. One thing that has surprised me this week in hearing Sir Laurie Magnus’s conclusions into Ms Rayner’s SDLT matter was the statement that: failure to obtain specialist advice and pay the correct amount of tax, plus that “this was established only following intensive public scrutiny, leads me to advise (that)…she cannot be considered to have met the 'highest possible standards of proper conduct’”. Well, really isn’t this just the minimum standard expected by HMRC, not the “highest possible”?