VAT penalty regime - over enthusiasm?

The fairly new VAT penalty regime based on behavioural tests appears to be causing much confusion amongst HMRC officers.  We have become aware over the past couple of months of a significant rise in the number of penalties being imposed by HMRC where it is at best questionable that the error a) was an error in the first place b) was ‘disclosed’ by HMRC (prompted) and c) was careless.   We are seeing this trend across all sectors and sizes of business, with penalties being imposed on those where there is a CRM large business relationship in place as well as on smaller businesses with no regular HMRC contact.   

Perhaps more worryingly is the move towards imposing penalties where a refund claim has been filed and there is later an adjustment to the figures following discussions between both parties, even though no repayment of tax has actually been made.   This begs the question as to whether businesses will think twice before filing complex refund claims where historically a collaborative approach would have taken place to agreeing the final value.  This would clearly be unjust. 

If you have been subjected to such a VAT penalty and you feel HMRC’s decision was not fair and reasonable, we would be happy to talk through the fact pattern with you.

For further information please contact Ward Williams’ Corporate Tax Director - Sarah Brock: sarah.brock@wardwilliams.co.uk