VAT Tribunal Appeals: How to Challenge HMRC Assessments

Understanding VAT Disputes with HMRC

VAT disputes arise in many forms. HMRC may have assessed you for output VAT you believe you do not owe, disallowed input tax you believe you are entitled to recover, imposed a penalty for a failure you believe was not your fault, or taken a position on the VAT treatment of a supply that you consider incorrect.

HMRC must offer a review with the decision; you can accept it or appeal straight to the First-tier Tribunal (Tax Chamber), within 30 days either way (VATA 1994 ss.83A, 83C, 83G).

Types of VAT Decisions You Can Appeal

Each of these carries a right of appeal to the tribunal, and the decision letter from HMRC should confirm this explicitly.

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Common Grounds for Challenging VAT Decisions

1. The Assessment Is Factually Wrong

The most straightforward ground is that HMRC has got the numbers wrong. This happens more often than you might expect. HMRC may have used estimated figures when actual records were available, double-counted certain transactions, or misunderstood the nature of a supply.

If you have contemporaneous records — invoices, bank statements, accounting software reports — that demonstrate the correct figures, this is often a strong ground of appeal.

2. The VAT Treatment Is Legally Incorrect

VAT law is notoriously complex. HMRC sometimes takes a position on the VAT treatment of a supply that is legally incorrect. For example:

• A supply that HMRC treats as standard-rated may actually be exempt or zero-rated
• A composite supply that HMRC has artificially split into component parts
• An agency relationship that HMRC has failed to recognise
• A transfer of a going concern (TOGC) that HMRC refuses to accept

These arguments require careful legal analysis, but they can succeed where HMRC has misapplied the law.

3. Reasonable Excuse for Penalties

If HMRC has imposed a late submission or late payment penalty, you may have a defence based on reasonable excuse. The legislation (FA 2021 Sch 24 para 19 and Sch 26 para 12) provides that a penalty is not due if the taxpayer had a reasonable excuse for the failure. Inaccuracy penalties turn on reasonable care, not reasonable excuse.

What counts as a reasonable excuse depends on the circumstances, but examples that tribunals have accepted include:

• Serious illness — where you or a close family member was hospitalised or incapacitated
• Bereavement — the death of a close family member around the filing deadline
• HMRC's own actions — where HMRC gave misleading advice or failed to process correspondence
• IT failures — genuine system failures (not simply forgetting your login details)
• Fire, flood, or theft — destruction of records making compliance impossible

What does not count as a reasonable excuse:

• Reliance on a third party — your accountant forgetting to file is not automatically a reasonable excuse for you
• Insufficient funds — inability to pay VAT is not a reasonable excuse for late payment (the legislation says this explicitly)
• Ignorance of the law — ignorance of a requirement can be a reasonable excuse if it was objectively reasonable for you not to know (Perrin at [82]); ignorance of a well-known requirement such as a VAT-registered business's duty to file its VAT returns on time, rarely is

4. HMRC Procedural Failures

HMRC must follow correct procedures when raising assessments and penalties. If HMRC has failed to do so — for example, by raising an assessment outside the statutory time limit, failing to give proper notice, or not following its own published guidance — this can be a ground of appeal.

5. Proportionality

The tribunal cannot cancel a penalty because it considers it unfair or disproportionate (HMRC v Hok Ltd [2012] UKUT 363 (TCC) at [56]–[58]); it may substitute a special reduction only if HMRC's decision was flawed (FA 2021 Sch 26 paras 13, 21; FA 2007 Sch 24 paras 11, 17(3)).

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Time Limits for VAT Appeals

Getting the timing right is critical. Missing the deadline can be fatal to your appeal.

The time limit is 30 days beginning with the date of the document notifying the decision (s.83G(1)).

What If You Miss the Deadline?

If you are outside the 30-day window, you must include an application for late permission in your notice of appeal. The tribunal will: (1) establish the length of the delay — if very short the later stages need little time; (2) establish the reason(s) why the default occurred; (3) evaluate all the circumstances, balancing the reasons against the prejudice to both parties and giving particular importance to the need for litigation to be conducted efficiently and for statutory time limits to be respected (Martland [2018] UKUT 178 (TCC) at [44]–[45]); the starting point is that permission should not be granted unless the tribunal is satisfied on balance that it should be ([44]).

Short delays with good reasons are more likely to be excused. Delays of several months or years without compelling justification are regularly refused.

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Pay First

You must normally pay or deposit the VAT in dispute before the tribunal will hear the appeal, unless HMRC or the tribunal accept hardship (VATA s.84(3), (3B)); penalties need not be paid first; make the hardship request in T240 section 4.

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The Appeal Process Step by Step

Step 1: Accept HMRC's Review Offer (Optional)

Accept HMRC's offer of review within 30 days of the offer (s.83C(1)(b)). A different HMRC officer will reconsider the decision from scratch. If the review finds in your favour, the dispute ends without a tribunal hearing.

Step 2: Lodge Your Appeal

If the review upholds the decision (or if you choose to go straight to the tribunal), submit your notice of appeal. You can do this online via the GOV.UK website or by post.

Your notice of appeal must include:

• Your name and address
• The HMRC decision you are appealing against (including the reference number)
• The date of the decision
• Your grounds of appeal — why you believe the decision is wrong
• The result you are seeking
• An address where documents can be sent
• a copy of the decision and any review conclusion letter (r.20(3))

Step 3: HMRC Files a Statement of Case

After receiving your appeal, HMRC will file a statement of case setting out its position and the evidence it relies upon. This must be served within 42 days (Default Paper) or 60 days (Standard/Complex) after the tribunal sent the notice (r.25(1)); in Basic cases there is none unless the tribunal directs (r.24(2)).

Step 4: Case Management

The tribunal may issue directions setting out the timetable for the case, including deadlines for exchanging documents, filing witness statements, and preparing the hearing bundle.

Step 5: Bundle Preparation

The tribunal's directions say who prepares the bundle; follow the Tax Chamber PDF bundle guidance.

Step 6: The Hearing

The tribunal hears evidence and legal submissions from both parties, then issues its decision — either on the day or in a written decision sent afterwards.

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Preparing Your VAT Appeal Bundle

A well-prepared bundle is essential. The tribunal judge will read the documents in advance, and a clear, logical bundle makes a strong first impression.

Recommended Bundle Structure

Formatting Your Bundle

The tribunal expects bundles to be:

• Paginated consecutively, with the index page numbers matching the PDF page numbers (para 7(4))
• Indexed with a clear table of contents
• Bookmarked in the PDF for easy navigation
• Text-searchable (OCR processed)
• Arranged in a logical order — usually chronological within each section

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Using BundleCreator for VAT Tribunal Appeals

Formatting a tribunal bundle by hand — numbering hundreds of pages, building an index, adding bookmarks — is time you could spend preparing your actual arguments. BundleCreator handles the mechanical formatting automatically.

With BundleCreator, you can:

• Upload invoices, VAT returns, correspondence, and supporting documents
• Organise them into logical sections with drag-and-drop reordering
• Apply automatic consecutive pagination
• Generate an index and PDF bookmarks automatically
• Process documents with OCR for text searchability
• Export a tribunal-ready electronic bundle in minutes

Whether you are a business owner challenging a VAT assessment or an accountant preparing bundles for multiple clients, BundleCreator removes the formatting burden so you can focus on the substance of the appeal.

Prepare your VAT appeal bundle with BundleCreator →

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Frequently Asked Questions

How much does it cost to appeal a VAT decision to the tribunal?

There is no filing fee to lodge an appeal with the First-tier Tribunal (Tax Chamber). The only costs are your own preparation time and any professional fees if you instruct a solicitor or accountant.

Can I represent myself at a VAT tribunal hearing?

Yes. The tribunal is designed to be accessible to unrepresented parties. You can represent yourself or appoint a representative (FTT r.11). For larger or more complex disputes, professional representation may be beneficial.

What is the difference between the late-submission/late-payment penalties and an inaccuracy penalty?

For VAT periods beginning on or after 1 January 2023, late returns and late payments are dealt with by the points-based late-submission penalty (a £200 penalty once the points threshold is reached (FA 2021 Sch 24)) and late-payment penalties (3% of tax unpaid at day 15, a further 3% at day 30, then 10% a year (Sch 26 paras 5, 8, as increased for VAT periods beginning on or after 1 April 2025 by SI 2025/589)) — these replaced the old default surcharge. An inaccuracy penalty is imposed when there is an error on your VAT return — the penalty percentage depends on whether the error was careless, deliberate, or deliberate and concealed.

Can HMRC raise a VAT assessment for earlier periods?

Yes, but there are time limits: 4 years after the end of the VAT period (s.77(1)), and within 2 years of the period or 1 year of HMRC having sufficient evidence (s.73(6)); 20 years for deliberate loss (s.77(4)–(4A)); there is no 6-year careless extension for VAT. If HMRC is out of time, this is a strong ground of appeal.

What is the "best judgement" requirement?

When HMRC raises an assessment, it must do so to its "best judgement" — meaning the assessment must be based on a reasonable calculation of the tax due, not an arbitrary or unreasonable figure. If HMRC has not exercised best judgement (for example, by ignoring records you provided), you can challenge the assessment on this ground.

Can I settle with HMRC after lodging an appeal?

Yes. Settlement discussions can continue at any stage, and cases can settle through negotiation or HMRC's ADR service, which is not available for Default Paper or Basic cases or automatic penalties (GOV.UK ADR guidance). If you reach agreement, the appeal can be withdrawn.

What happens if I lose my appeal?

The HMRC decision stands, and you will need to pay the VAT or penalty assessed plus any accrued interest. You may be able to appeal further to the Upper Tribunal, but only on a point of law — you cannot simply reargue the facts.

Will I have to pay HMRC's costs if I lose?

Not usually. In any category the tribunal can order costs only as wasted costs or where a party has acted unreasonably in bringing, defending or conducting the proceedings (FTT r.10(1)(a),(b)). In a Complex case it may also order costs against the losing party, unless the taxpayer asked the tribunal in writing, within 28 days of being told the case was allocated as Complex, for the proceedings to be excluded from costs liability (r.10(1)(c)).

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This article is provided for general informational purposes only and does not constitute legal or tax advice. The law and procedure described applies to England and Wales. If you are unsure about your specific situation, seek independent legal or professional advice.