VAT has been implemented by the United Kingdom since 1973 and since then there has been endless disputes between HMRC and businesses regarding VAT transactions and what is their correct treatment.
VAT has always been a hotspot for investigations and disputes, and this will no doubt become even more apparent in the coming years due to the introduction of HMRC’s new penalty regime on 1/4/09 which was then expanded on 1/4/10.
HMRC will now charge penalties on documents sent to them if:
An error has occurred because “reasonable care” wasn’t taken to avoid the error.
Sent with the deliberate and intentional objective of sending incorrect information.
Mistakes have been concealed – realising that a mistake has been made then trying to hide it
There are different levels of penalty depending on the situation , and how HMRC deem the errors to have arisen, below is a short summary of how the penalty system works.
Penalty issued because:
- Reasonable care not taken – penalty is between 0% and 30% of the understated tax.
- Deliberate errors – penalty is between 20% and 70% of the understated tax.
- Concealed errors – penalty is between 30% and 70% of understated tax.
There are also certain situations which can reduce these penalties, for example:
1. Informing HMRC about any errors
2. Helping them with their investigation
3. Making information easily accessible
There is no doubt that VAT can be a complex area of taxation, and for that reason businesses often ignore their statutory responsibilities which can have severe consequences. However, with competent and professional advice there is no need for it to be a daunting experience.
We have many years’ experience in dealing with HMRC regarding VAT and its transactions, we can offer competent advice on:
The VAT position of any transaction.
VAT Planning with the intention of mitigating your VAT position.
Payment & Lodgement deadlines of VAT.
The consequences of late lodgement of VAT Returns & payments.