Re-charging VAT. No loss to HMRC. Unfair penalty?

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?  

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It's already reduced

thisistibi |
thisistibi's picture

No input VAT?

valentino rossi |
valentino rossi's picture