VAT penalties for inaccuracies

VAT penalties for inaccuracies

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Client submitted claim under DIY builders scheme, HMRC have rejected on basis of a clause in the planning which says the property can only be used by the adjacent business. We dispute their interpretation here. We have the opportunity to go back with more info to get them to look at it more closely, and/or go for a review by VAT appeals officer and then we could still go to tribunal. At the same time they have written re "proposed penalties" under sch 24 FA 2007 for inaccuracy. It seems utterly ridiculous for them to be talking penalties when the deadline for providing more info and getting a review hasn't even passed yet. The point may yet be moot if we can convince them the claim is valid or is this just them telling us that they have already decided and won't be changing their mind. HMRC guidance doesn't seem to tell them when it is approprorate to start the penalty ball rolling but it smacks of guilty until proven guilty. I wouldn't even class this as a larger misdeclaration, the claim is for c£10k.

Has anyone else experienced this? Any advice on how to deal with it?

Replies (3)

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chips_at_mattersey
By Les Howard
28th Feb 2014 14:45

D-I-Y Scheme

Shocking!

I have seen numerous claims, and never known HMRC to issue a penalty.

You should be aware that the Upper Tier Tribunal is currently hearing a case called Burton, which should give a clearer precedent as to whether the planning restriction does mean that the VAT is not reclaimable.

Feel free to PM me if that would be helpful.

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By billgilcom
28th Feb 2014 15:31

A shot across the bows?

OK under the Human Rights Legislation HMRC have to warn taxpayers if they consider that penalties MAY be applicable. I suppose you wouldn't be too happy if they didn't warn your client and then came out of the woodwork after the figures were settled to say "Oh yes by the way there are now penalties". At least they are warning your client so that it is something that both of you can bear in mind when dealing with the matter. At least you will know not to provide any false information during your  communications with them. In any case they have to prove penalties so the upfront warning at least arms your client with the knowledge that HMRC are considering that penalties MAY arise.

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Rachel Davies
By Rachel Davies
28th Feb 2014 18:19

True but it seems a bit of a waste of time for us to be having to go back and provide information to prove that the client hasn't acted carelessly or deliberately when it hasn't yet been finally determined that there is an inaccuracy. I have no problem with them pointing out that penalties may be due but to have us justify why they shouldn't be on a 30 day time limit when we also have the appeal against their decision to deal with seems a bit much.

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