VAT Penalty Case Studies

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Client One | Building Purchase | £10,000 VAT Penalty overturned

Our client purchased a building on which VAT was charged. As they received the purchase invoice promptly, they recovered the VAT on the VAT return that they were currently submitting. Unfortunately, the VAT return was for the period ending in June and the invoice was dated 1 July. Our client was therefore unable to recover the VAT incurred on their June return and should have waited until they were submitting their September VAT return in order to recover this VAT. When they found out, HMRC initially sought to impose a penalty of over £10,000. Naturally, our client was appalled that they would be expected to pay so large a penalty for what was, in fact, a timing error of 3 months. We approached HMRC on the client’s behalf and succeeded in achieving a position where the client did not have to pay a penalty at all.

Client Two | Investigation | Penalty Avoided

Our Client had a VAT visit and HMRC identified a number of errors on the VAT return including scale charge, failure to have proof of export and recovering VAT on Google Adwords invoices that bore Irish VAT. It could be seen that until recently, the company had in the past accounted for these issues correctly but the internal accountant had recently been ill. There was no dispute that the assessment raised by HMRC was correct. HMRC sought to impose penalties. We challenged this on the basis that there had been lapses in the accounting system that were substantially as a result of the accountant’s illness. It was eventually agreed with HMRC that no penalty would be imposed.

Client Three | HMRC Visit | VAT Penalty avoided

Following a HMRC visit, our client was told that HMRC believed that they had recovered VAT on costs relating to a building incorrectly. HMRC believed that it had not been used for VAT-able business purposes as although it was occasionally hired out, the income was minimal. They sought to assess for the VAT recovered and impose penalties on top. We were able to convince HMRC that the hiring out of the building was in fact a business and consequently it was legitimate to recover VAT on costs incurred in renovating the building. The client was delighted that they didn’t have to repay several thousand pounds to HMRC and also had no penalties to pay.

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