Personal Penalties

HMRC have the power to raise penalties for tax returns that are thought to be deliberate. They do not have to prove that the action was fraudulent, simply that a taxpayer knew that its tax declaration, be that VAT or any other tax, was known at the time to be wrong.

In respect of a company, if a VAT return was knowingly wrong, subsequent assessments can be moved onto the director(s) personally if the company becomes insolvent and cannot pay. HMRC policy is also to name and shame directors and companies, as can be seen from the following link.

Regarding missing trader (MTIC) cases, where the directors knew or should have known of a connection to fraud (the Kittel principal), legislation will soon be changed. At present, the directors can be held personally liable for approximately 80%-100% of the VAT/input tax denied, but only if they actually knew of the connection to fraud. If the directors simply should have known, legalisation currently does not allow for personal penalties to be raised. However, soon, either allegation will result in a director being liable to a fixed 30% penalty.

The caselaw regarding MTIC VAT personal penalties can be found here:

2018-08-01T19:40:10+00:00 April 23rd, 2018|HMRC Procedure|