£10k VAT penalty appeal

An appeal by an architect, Paul Evans, against penalties associated with inaccurate VAT assessments was rejected by the First Tier Tribunal (FTT). The appeal came after HMRC discovered and imposed penalties for fraudulent invoices, leading to a total penalty of £10,340.76 for the 06/14 tax period. The actions were deemed as intentionally deceptive by HMRC.

Evans, the sole director of Maxxim Residential Design Ltd, had filed repayment returns for the disputed tax periods, totalling £11,179.22, which were submitted on 8 July 2014. HMRC's Officer Sandberg had subsequently contacted Evans on 23 July 2014, asking for documentation to verify the VAT return, such as purchase listings and invoices.

Evans provided the requested spreadsheet of purchases, although it lacked supplier details, prompting HMRC to ask for the purchase invoices. As these were illegible, HMRC asked for clearer copies. Despite further attempts to contact Evans, HMRC received no response.

In response to the lack of cooperation, HMRC issued a £300 penalty and warned of additional penalties unless the requested information was supplied by 23 January 2015. However, Evans did not respond, and his previous addresses were found to be inactive, marking him as a 'missing trader'.

Finally, HMRC rejected all VAT claims on the 06/14 return on 28 October 2015 and disallowed all VAT claims from VAT returns between 03/13 and 03/14. The inaccuracies on Evans' VAT return were marked as intentional and hidden, leading to a penalty of 92.5% of the VAT. This penalty was reduced from a potential 100% as Evans admitted to the overclaims and granted limited access to his records.

Evans contested the penalty in a tribunal, arguing that his actions were neither deliberate nor concealed. However, HMRC maintained that Evans' actions were intentional, citing errors in his tax claim and two false invoices. The resultant penalty was 92.5% of the potential lost revenue of £11,179.20, leading to a charge of £10,340.76.

Referencing Sch 24, Siobhán Brown, a litigator from HMRC's legal office, argued that while 'deliberate and concealed' is not explicitly defined, examples included 'providing false evidence to back up an incorrect figure'. Judge Geraint Williams agreed with Brown's argument, stating that Evans' disclosure of errors didn't carry enough weight to dismiss the penalties, especially given the lack of details about these 'errors'.

The tribunal upheld the assessments and rejected the appeal.