Hello. I'm dealing with a new client case where a building subcontractor failed to registered for VAT. Whilst ignornance of the law is of course no defence, he didn't previously register because the majority of work was zero-rated, and he didn't realise this counted towards the VAT threashold. Anyway, the client's contractors have now agreed to a VAT re-charge. So, my client will now charge the VAT. The contractors will reclaim it on their next Return and pay the VAT to my client, who shall then pay it to HMRC. Quite a pointless exercise, because no additional tax revenue is raised. Apart from a penalty. HMRC plan to impose a reduced 15% penalty on the VAT. That'll mean a penalty of £5000 or so. I have of course claimed that whilst the client was ignorant of the law, his excuse is reasonable. I have also pointed out to HMRC that no tax revenue was lost. Is there any way of reducing the penalty?
27th Mar 2012 14:52