HMRC VAT Penalties
HMRC may issue a VAT penalty when it believes that wrongdoing has been committed, resulting in sums due to the Crown which have not been paid.
VAT penalties arise for all kinds of reasons. Some of the most common examples include –
• A penalty for not keeping VAT records
• VAT penalties for late payment
• A penalty for going over the VAT threshold
• A penalty for not being VAT registered
• VAT evasion penalties
Sometimes, a genuine mistake has been made, resulting in minor losses for HMRC. If this applies to you, you may be willing to accept your error and pay the fine. Or if you have a reasonable excuse for the wrongdoing, you can explain this to HMRC and have the decision overturned.
However, if HMRC believes your conduct was deliberate, or amounts to widespread evasion, the implications could be extremely serious.
If HMRC believes you have failed to comply with VAT rules and regulations, it may issue a VAT penalty. This is a type of ‘wrongdoing penalty’. If you do not dispute the penalty, HMRC will assume that you have accepted responsibility and pursue payment.
VAT wrongdoing penalties can have criminal implications. Liability for payment can also be passed to the directors or partners. Because of the potential consequences, it is important to seek legal advice at the earliest available opportunity.
At Altion Law, we offer professional legal support to those facing VAT penalties. We can examine why you are facing a penalty and take action to resolve the issue. This ensures the best possible outcome for you and your business.
The first thing that happens is that HMRC writes to you, advising you of their intention to issue a VAT penalty. HMRC sets out their reasons and asks you for information or comments. You should also be given a Human Rights Act notice, stating that you do not have to answer HMRC’s questions.
At this stage, we highly recommend contacting us for expert legal advice. You need to be extremely careful about what you say to HMRC, or it could work against you in the long-run. We can respond on your behalf, explaining the situation. HMRC will not proceed with the penalty if you can show that –
• You have a reasonable excuse for the wrongdoing, and
• The wrongdoing was not deliberate, and
• You notified HMRC without unreasonable delay
If HMRC does not accept that you have a reasonable excuse, it will formally raise a VAT penalty. You can then either pay the penalty, or you can request a review. You only have 30 days in which to request a review, starting from the date of the original decision.
When you request a VAT penalty review, the matter is passed to a different HMRC officer. This officer considers the matter in full before deciding whether a VAT penalty is payable.
If the decision is not overturned on review – in other words, you are told you must pay a VAT penalty – your final option is to make an appeal to the Tax Tribunal. The Tax Tribunal is similar to a court. However, the procedure is less formal. You must submit this appeal within 30 days of the written review decision being issued.
Sometimes you can proceed straight to a Tax Tribunal, rather than requesting a review first. We can advise on the best approach in your particular circumstances.
If you do not dispute the VAT penalty, HMRC will assume that you accept responsibility for the penalty and pursue you for payment. HMRC may also take further action, particularly if the wrongdoing is deemed to be deliberate. In these cases, the penalty could be crossed over to a director or partner personally. There could also be a criminal investigation.
HMRC takes various matters into account when calculating a VAT penalty. This includes the amount of potential lost revenue (PLR) and whether your behaviour was –
• Not deliberate
• Deliberate and concealed
• Disclosed voluntarily by you
If HMRC has contacted you, notifying you of their intention to issue a VAT penalty, please contact us immediately. Even if it is just a warning, we can prevent the matter from escalating.
At Altion Law, we specialise in advising and representing parties who have received VAT wrongdoing penalties. We can say –
• Whether you are the correct party for HMRC to pursue
• Whether there are any additional risks, such as HMRC investigations or penalties against company directors personally
• Whether there are any defences available to you
A VAT specialist solicitor can explain the options available to you, recommending how best to proceed. If appropriate, we can present evidence and information to HMRC, outlining why a penalty should not be raised against you.
It is vital that you act sooner rather than later, or it could have serious consequences for your business.