Too big to miss

Deliberate or careless output tax errors

During a VAT compliance visit in 2014 the HMRC officer found output tax errors as a result of the bookkeeper preparing calculations from manual records rather than by using the company’s Sage system. Many sales invoices were included in that system but excluded from the manual records resulting in understatements. HMRC issued assessments to recover the VAT and also a 42.5% penalty on the basis that the errors were ‘deliberate but not concealed’.

The taxpayer appealed. The directors said they relied on the bookkeeper to deal with the VAT returns. Although acknowledging that they should perhaps have checked the forms more carefully they admitted that they had looked only at the VAT due to be paid. The directors also highlighted personal problems of the bookkeeper as contributing to the errors. But HMRC felt that these should have encouraged the directors to...