Not justified

Penalty for dishonest behaviour

The taxpayer set up a property development company and submitted VAT repayment claims. In 2005 after a VAT visit HMRC asked for invoices to support the claim. The taxpayer asked the contractor to send copies of the invoices. The copies were on the taxpayer’s evidence to the First-tier Tribunal (TC2762) ‘useless’ but he passed them on to HMRC.

HMRC imposed a penalty under VATA 1994 s 60 on the basis that the company had tried to obtain a VAT repayment dishonestly. Under s 61 the penalty could be recovered from a director of the company if the dishonesty was attributable to them. The First-tier Tribunal ruled that the taxpayer must have realised that in submitting invoices which he knew to be useless he was behaving dishonestly and upheld the penalty. The taxpayer appealed.

The issue was whether the...