More than half of firms hit by penalties for late or inaccurate VAT returns win their appeals against HMRC-imposed sanctions, according to official figures.
Over 18 months, the taxman completed 28,912 reviews of technical decisions and VAT default surcharges levied on businesses, of which 16,270 (56%) were overturned after being ruled incorrect. The newly released information also shows that 48% of technical decisions were annulled on review.
The data was obtained from the Revenue’s internal review team through a Freedom of Information request by the accountancy UHY Hacker Young, which described the statistics as disturbing and suggested that VAT officers are under pressure to issue as many fines as possible.
The company’s VAT partner Simon Newark accused the taxman of ‘handing out fines like traffic wardens hand out parking tickets.’
He added: ‘HMRC officers are meant to be properly trained in understanding the law and be able to make correct decisions on VAT matters. It’s no exaggeration to say that incorrect decisions could and do destroy businesses.
‘HMRC’s review team (which was set up in April 2009 with the intention of resolving tax disputes quickly and inexpensively] is not truly independent and will support the original decision whenever it can and will only overturn decisions that are so blatantly wrong that they don’t have a leg to stand on,’ claimed Mr Newark.
‘Many of the decisions that are upheld will only have the slightest justification… at best, and HMRC are probably relying on taxpayers not having the time or money to pursue the matter further.’
A spokesperson for the Revenue said, ‘Only a small proportion of the millions of decisions we make each year are queried. Our decisions are based on the information we have at the time.
‘Removing a penalty after someone gives a reasonable excuse for their lateness does not mean the penalty was wrongly levied but that we accept the customer’s [sic] excuse.’