Taxpayer’s intention

Appropriateness of a “deliberate error not concealed” VAT penalty

The taxpayer had been VAT registered since 2005 as a property business. In June 2011 he decided to start a chauffeur service and bought three new cars. He claimed input tax on the basis that he intended to use them in his new business.

HMRC said the taxpayer needed to provide evidence of the new business which he was unable to do. The claim was disallowed therefore on the basis that the cars were used for private purposes rather than business. The officer also charged a penalty equivalent to 47.25% of the tax overclaimed on the ground that the taxpayer’s behaviour fell within the category of “deliberate behaviour without concealment” (FA 2007 Sch 24 para 3(1)(b)).

In October 2014 it was established that no VAT had been charged by the seller on one of the vehicles. HMRC said...