Omission of output tax on property sale

A partnership registered for VAT to opt to tax a commercial property and claim input tax on repair costs. In March 2015 it sold the property for £179 000 plus VAT of £33 800. It submitted a nil VAT return for the period ended 31 May 2015 – omitting the output tax on the sale. HMRC identified the omission when checking the input tax claim of the buyer and raised an assessment. 

The officer decided the omission was a ‘deliberate and prompted but not concealed’ error with a penalty range of between 35% and 70% of the tax underpaid. The penalty was discounted to 45.5% because the taxpayer gave some help and assistance to HMRC. 

The senior partner claimed that the output tax omission was a ‘basic administrative error’ rather than a deliberate action. He also said that a former employee had completed the nil return even though there...