Appeal the Tax Assessment, not just the Deliberate Penalties
Appeal the Tax Assessment, not just the Deliberate Penalties
This case serves as a critical lesson for anyone facing both a tax assessment and personal deliberate penalties from HMRC.
A company director in the building industry faced a VAT assessment of £462,961 along with approximately £220,000 in personal penalties. HMRC had deemed an inputting error to be deliberate, and the consequences were severe.
The director failed to file formal appeals against the company’s VAT assessments. The company subsequently entered liquidation, and the assessments became final and binding. This created a fundamental problem when the director later sought to challenge the personal penalties.
The critical lesson from this case is clear: if the company does not appeal the underlying tax assessments, those assessments cannot be challenged during a later appeal against the Personal Penalties. The penalty amount is calculated by reference to the assessment, so if the assessment stands unchallenged, the penalty figure is effectively fixed.
Where a company has entered liquidation, permission is needed from the liquidator or the Official Receiver before an appeal against the company’s assessments can be pursued. This adds a further layer of complexity, but it is not an insurmountable obstacle. Out of time appeals remain possible in appropriate cases, though they require strong grounds and prompt action.
The successful Tribunal decision in the Ioan Popa case demonstrates that these situations can be resolved favourably. However, the best approach is always to appeal both the assessment and the penalties at the earliest opportunity. Failing to do so can severely limit the options available later.
Frequently asked questions
Can I challenge the tax assessment when appealing personal deliberate penalties?
Not if the company failed to appeal it. Where a company does not appeal the underlying tax assessment, that assessment cannot be challenged during a later appeal against the personal penalties. Because the penalty is calculated by reference to the assessment, an unchallenged assessment effectively fixes the penalty figure.
What happens if a director does not appeal the company's VAT assessment?
In the case discussed, a building industry director faced a VAT assessment of £462,961 and around £220,000 in personal penalties after HMRC treated an inputting error as deliberate. No formal appeals were filed against the company's assessments, the company entered liquidation and the assessments became final and binding, which created a fundamental problem for the later penalty challenge.
Can a company in liquidation still appeal an HMRC assessment?
Yes, but permission is needed from the liquidator or the Official Receiver before an appeal against the company's assessments can be pursued. This adds complexity but is not an insurmountable obstacle. Out of time appeals remain possible in appropriate cases, although they require strong grounds and prompt action.
Should I appeal both the tax assessment and the penalties?
Yes. The best approach is always to appeal both the assessment and the penalties at the earliest opportunity, because failing to do so can severely limit the options available later. The successful Tribunal decision in the Ioan Popa case shows these situations can be resolved favourably, but early appeals on both fronts remain the safer course.
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