Tax Update (July 2008)
VAT Penalties
HM Revenue & Customs (HMRC) have extended their new system of penalties for
errors in tax returns to include claims for VAT refunds.
Whilst most people do get their VAT returns correct, HMRC sees the new systems as
a means to encourage those that don't to be more careful and stop them from gaining
an unfair advantage.
The new penalties apply to VAT claims under EC 13th Directive (i.e. businesses
based outside the EU) and, under EC 8th Directive (i.e. businesses based
in other EU member states).
Even if you do make an error you may not automatically get a penalty as the system
is based on taking reasonable care to get it right. HMRC have given some guidance
on what they see as reasonable care:
- Keeping correctly completed invoices, vouchers and receipts to support your claim
and sending these to HMRC with the claim;
- Ensuring that you have, and provide, an up to date certificate of status of business
activity;
- Checking what goods and services you can claim VAT on from the UK and, when you
do not understand something, seeking advice from them or an agent familiar with
UK refund rules and procedures;
- Telling HMRC promptly about any mistake you discover after you send them a claim.
Penalties may be reduced where you tell HMRC about errors before they ask, and where
you show co-operation with them. The penalties are divided into 4 categories with
minimum and maximum rates as follows:-
|
|
Min%
|
Max %
|
|
Where you show reasonable care
|
0
|
0
|
|
Where you are careless
|
0
|
30
|
|
Where the act was deliberate
|
20
|
70
|
|
Where the act was deliberate and concealed
|
30
|
100
|
You do have the right to appeal against the penalties.
Mentor Tax can advise you on any issue relating to Tax, VAT, PAYE and much more
– call the Mentor Tax Advice Service on 0870 600 0829 if you have any concerns.
Maximum call charge from a BT landline is 6p plus up to 6p per minute.
Business rates and calls from other networks may vary.
