We were asked to represent an electrical installation business following an inspection of VAT records by HMRC. The VAT inspector had identified errors in excess of £85,000 VAT over 6 years and had decided that the errors were deliberate. The officer imposed penalties of around £55,000.
On behalf of the taxpayer, we sought a review of the penalty. We argued that the actions leading to the errors were careless rather than deliberate and that the officer had failed to allow sufficient mitigation given the degree of cooperation shown by the taxpayer and his accountant.
On review, HMRC accepted that there was no evidence of deliberate behaviour or dishonesty. This meant that part of the assessment was ‘out of time’ because unless the officer could show dishonesty, the ordinary time limit of 4-years applied.
The assessment was reduced to £24,000 and penalties were suspended subject to the taxpayer putting in place appropriate checks to guard against future errors.