HMRC Criticised by Tribunal for Late Notification Charges

blog-publish-date

08 Jun 2016

blog-read-duration

We at Croner Tax have been aware for some time that HMRC are applying the letter of the law and charging penalties in cases where there is a late notification of a change of legal entity, but now a VAT Tribunal has criticised this policy. The legislation states that a person who becomes liable to register for VAT by taking over a business as a going concern must notify HMRC of this fact within 30 days of the transfer date: failure to so can render the person liable to a penalty unless there is reasonable excuse. HMRC’s current policy seems to be to charge a penalty even where all returns and payments have been made on time. HMRC calculate the penalty based on the potential lost tax i.e. the VAT due from the date the notification was required up to the date notification was made. This was the case in J&W Brown (TC05101). Mr Brown ran a business as sole trader completed his VAT returns and paid VAT due on time. In November 2012 his son Kenneth became a partner in the business, however, Mr Brown continued to submit his VAT returns and pay the VAT due as a sole trader and did not inform HMRC of the change of legal entity until July 2014. HMRC deemed the notification in July 2014 to be a late VAT registration by the partnership. When a notification is more than 12 months late HMRC can impose a failure to notify penalty of between 10 and 30% of the VAT due. In this case HMRC issued a penalty of 18% of the VAT due by the partnership from November 2012 to July 2014. HMRC did mitigate the penalty by a further 70% down to £582 to reflect the fact the VAT returns and VAT due for the periods in question has been submitted and paid by Mr Brown as a sole trader meaning there was no loss of tax for HMRC. However, the issue was referred to the First Tier Tribunal. The Tribunal noted that the issue “was one of the merest technicality a minor administrative hiccup involving minimal culpability, causing no revenue loss and no administrative inconvenience to HMRC”. The Tribunal reduced the penalty to just £100. We believe that HMRC will reduce penalties where they are challenged by a taxpayer, although rather than mitigate them completely the reduction is often to a level that they are not worth appealing. Our litigation expert, Glyn Edwards, has had success in challenging HMRC on this issue, negotiating a penalty reduction of over £10k of VAT. If you require assistance in mitigating penalties, please call one of our VAT specialists on 0844 561 8101. Please remember that our service can extend to written consultancy at a rate of £180 per hour plus VAT. VAT Voice is a free magazine from Croner Tax sharing the latest news and trends in VAT as well as giving you a chance to get to know the members of our growing VAT team. The 5th edition is now available to download. Get your copy here.

Free to Download Employer Resources

  • Model Apprenticeship Agreement

    FREE DOWNLOAD

    Model Apprenticeship Agreement

    Read more
  • Sample COSHH Assessment Record

    FREE DOWNLOAD

    Sample COSHH Assessment Record

    Read more
  • Return to Work Interview Form

    FREE DOWNLOAD

    Return to Work Interview Form

    Read more
  • Conditional Job Offers

    BLOG

    Conditional Job Offers

    The job process can be a long-winded one for all involved. From creating the job...

    Read more
  • Eye Health in the Workplace

    BLOG

    Eye Health in the Workplace

    On average 1000 injuries occur to people’s eyes every day.[1] The best way to p...

    Read more
  • Case Law - Discrimination Outside of Work

    BLOG

    Case Law - Discrimination Outside of ...

    The EAT has held that employers could avoid being liable for discriminatory acts...

    Read more
  • Syalons

    CASE STUDY

    Syalons

    International Syalons is a manufacturer of advanced ceramics, working for variou...

    Read more
  • Pangea Support

    CASE STUDY

    Pangea Support

    We see Croner being integral to our organisation moving forward, and we’d defini

    Read more
  • JC Couriers

    CASE STUDY

    JC Couriers

    With Croner it genuinely feels like they want me to be a success. And I'm happy

    Read more

Do you have any questions?

Get a free callback from one of our regional experts today