Harsh but correct

Penalty for a late VAT return

The taxpayer used the VAT annual accounting scheme. Its year ran to 31 December so it was required to submit its December 2016 return by 28 February 2017 (scheme users have an extra month to complete a return compared with a business submitting monthly or quarterly).

The company failed to submit the return on time so HMRC estimated the liability and issued a central assessment for £35 578 on 17 March 2017. The company had already paid £32 499 on account during the year – this being a condition of the scheme – but made an additional payment of £46 131 on 5 April. The return was submitted on 7 June showing VAT due of £215 233 which the taxpayer paid immediately.

HMRC issued a penalty because the taxpayer had accepted a central assessment knowing it was too low (FA 2007 ...