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When submitting his quarterly VAT returns the taxpayer deliberately paid more tax than was due to avoid the risk of underpayment.
His accountant carried out a reconciliation at the end of the year; adjustments were made in subsequent returns to reflect the correct figures.
By 1 March 2006 the taxpayer was in credit for overpaid VAT of £5 648.83. He decided to reclaim the amount by underdeclaring in returns submitted after the date.
During a VAT inspection in early 2010 HMRC said the taxpayer should have made a voluntary disclosure to amend the tax but it was then too late.
The First-tier Tribunal noted the taxpayer had ‘knowingly submitted false VAT returns’ and had signed the declaration on the returns saying they were ‘true and complete’ when he knew they were not.
Manipulating the VAT figures to manage cash flow had no basis in...
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