There has been a 38% increase in the serious penalties issued for what HMRC says are ‘deliberate’ VAT errors in the last year, according to chartered accountants and business advisors Lubbock Fine.
These errors refer to cases where HMRC believes the business made an active decision to illegally underpay VAT, perhaps by not declaring the correct VAT on sales, or overclaiming VAT on costs. In those cases businesses can be fined up to 100% of the VAT owed.
The number of these serious fines has increased to 2,781 in the past year from 2,011 in the previous year. In total, HMRC handed out £153 million in fines across 46,376 penalties in the past year as it cracks down on errors that are deemed ‘deliberate’.
Jas Dhillon, VAT Partner at Lubbock Fine, says: “HMRC is getting tougher with its VAT fines and issuing a growing number of its most serious penalties. It’s difficult not to conclude that it’s a concerted effort to bring in more cash.
“HMRC appears to be taking a tougher approach to VAT penalties, aiming to categorise more inaccuracies as ‘deliberate’. Classifying errors as ‘innocent’ would result in lower penalties, or even no penalty at all – which of course means a smaller take for the taxman.”
For the most serious cases – those HMRC terms ‘deliberate and concealed’ – penalties can range between 30% and 100% of the tax due. These are cases where HMRC believes the taxpayer has deliberately or intentionally tried to avoid paying their taxes, often through false or amended documents. The number of these penalties rose 4% in the past year, from 1,924 to 1,994.
