Penalty reduced

Nature of input tax errors

The taxpayer was assessed for input tax errors and a ‘deliberate error not concealed’ penalty of 70% under FA 2007 Sch 24. He registered for VAT from February 2008. The VAT returns had entries for inputs and input tax claims only. No outputs were shown. HMRC began enquiries in May 2013 and disallowed the input tax claims.

When the taxpayer had first applied to be VAT-registered he stated that his business was to import and sell goods including ‘basmati rice working gloves kitchen towel and small leather items’. However in 2013 the business was buying clothes from retailers in the UK and exporting them to overseas stores. The taxpayer accepted that he had not gone through the correct procedures to export goods on a free-of-VAT basis but said he had not realised this at the time. Further...