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Small errors and disproportionate VAT penalties

29 April 2020 / Mike Thexton
Issue: 4741 / Categories: Comment & Analysis
19775
The butterfly effect

Default surcharge has always been a blunt instrument inflicting random damage on those who fail to pay their VAT on time; occasionally however a case comes before the tribunals that is so extreme it still takes my breath away. Remember that following the Upper Tribunal’s decision in Total Technology (Engineering) Ltd [2012] UKUT 418 (TCC) it is almost impossible for a penalty to be struck down on the grounds of ‘disproportionality’. Now the threshold for a penalty to be struck out is that it must be ‘not merely harsh but manifestly unfair’.

A couple of years ago I was moved to write about the decision in Global Switch Ltd (TC6252) (‘A perfect stormTaxation 1 February 2018 page 18) in which an accounting error in 2013 relating to a payment of...

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