Penalty for careless behaviour is justified

The taxpayers registered for VAT in September 2015 as a partnership citing their activity as ‘property management’. They claimed input tax on invoices for supplies of building services received from suppliers between periods 12/15 and 9/16.

HMRC opened an enquiry as the VAT registrations of two of the partnership’s suppliers had been cancelled. The suppliers had not provided any evidence to show that they were involved in legitimate business activities. As a result HMRC disallowed the taxpayers’ claim on the basis that they knew or should have known that the invoices were connected to the fraudulent evasion of VAT. HMRC noted that the partners had carried out no due diligence checks on the suppliers; one of the suppliers also used the same bookkeeper and premises as the partnership; and there was no evidence of the suppliers being paid for these invoices.

In November 2018 ...