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I'm not
so sure that the above 2 cases are what you would call error or mistakes.
Charging VAT when you're not registered and not declaring an offshore account isn't really a mistake is it? An error of judgement probably.
The fines are a bit stiff
Please tell me these two cases are one off's its very worrying, as accountants we could be walking into a minefield and not know it.
Getting out
When I read reports like this my approaching retirement looks ever more attractive. I don't know about a minefield - it feels more like a shooting gallery with me as the target. Right in the middle of the silly season three new investigations with unreasonable deadlines. The Revenue have really lost sight of the ball.
The thing with deadlines
is that you can actually appeal against them. You can't appeal against a notice to supple docs but you can against the deadline.
So if you know that say in Jan you will be tied up, then appeal with the reason and state a date when you know you will be able to complete. Puts the ball back in your court.
After the Knee Jerk!
Charging VAT when not in possession of a current VAT number is hardly "A Mistake": it is a potential criminal offence.
I would have advised the client:
1. To instruct their adviser to write: using Special Delivery which then should produce an audit trail:
2. To attempt registration on the client's behalf via the delegated authority:
3. To keep a precise event chain file record: and, finally,
4. Not to levy VAT on revenue outputs until such time as they had achieved formal registration.
OK; so if the client company had exceeded the compulsory registration threshold and had not advised HMRC, then they would be wrong.
However failing to register in time is a lesser offence, which could have been ameliorated and mitigated by proving their logged attempts to register.
In the second case of trying to evade IHT, (since the supposed gift occurred within the seven year exemption rule) it was a clear case of attempted evasion; surely?
Since all too often, taxpayers avoid professional counsel and believe their laissez faire approach can be later talked out of, the old legal tenet of volenti non fit injuria, rather applies!
Both of the two linked cases appear like HMRC is trying to use its power to impose penalties instead of launching criminal charges. In both cases the taxpayer (or should I say 'attempted non-taxpayer) took a course of action that, through deliberate non-disclosure or otherwise, reduced the amount of revenue collected. I am personally quite surprised and disappointed that, at least in the case of Hutchings, criminal charges were not laid.
Wrong sort of shocking
The two cases appear to be a different sort of shocking to that intended by the article. As others have said, what is shocking is that these people have ONLY received penalties, not more severe punishment.
For the assertion that penalties are a trap for the unwary, we really need case studies that show the unwary being trapped. Lucam was, at best, foolish, not unwary (not charging VAT without a VAT number is one of the clearer parts of HMRC guidance). Hutchings was not unwary at all, but someone who simply failed in what looks like deliberate evasion of tax. What case studies are available where someone has suffered penalties, which have been upheld, when it could be held they genuinely have an excuse for the failure?
No Sympathy due and no shocks here
Both of these cases are clear in law and I agree with stepurhan.
We do read of cases where the results are poor and where the taxpayer has a genuine reason that is not upheld.
Hiding an offshore account - come on - that is hardly HMRC being overzealous or shocking. Charging VAT when you shouldn't - again that is hardly a shocking result.
tax laws
The other side of the coin. I submitted a request in writing on my letter headed notepaper. After some wait, I phoned HMRC asking for a reply. I was told that someone had mis copied my post code and the original had been returned as 'not known'. Instead of doing what I would term the natural thing, they simply did not bother to check that their details were correct, and sent me no more.
After reading the above, I feel thet I should be fining them for carelessness.
Who got the VAT
Did they keep the incorrectly charged VAT or pay it over?
Assuming they paid it over to HMRC and whoever got a VAT invoice reclaimed it, where is the loss to HMRC?
Didn't pay the VAT
Did they keep the incorrectly charged VAT or pay it over? Assuming they paid it over to HMRC and whoever got a VAT invoice reclaimed it, where is the loss to HMRC?
Well I think the issue is that they didn't pay it over to HMRC (you can't fill and pay a VAT return if you don't have a VAT number). When HMRC came knocking they'd also mislaid all of the records to show how much VAT they'd charged...
Serves them right
Will they get what they deserve.
Thought they might have added the vat to the fist return they did submit.
As HMRC
are short of cash they probably prefer heavy penalties to short prison sentences.