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Are penalties issued between April 2008 and April 2009 for VAT dishonesty invalid? What follows is based on an exchange of correspondence with HMRC, where I have put the point that the relevant penalty provisions seem to contain a hole in them, which the department does not appear to have very successfully argued against to date.
If HMRC have issued a penalty for conduct involving dishonesty under VATA 1994, s 60 for periods between 1 April 2008 and 1 April 2009, it is uncertain what, if any, statutory provision that penalty can be levied under. Before the enactment of FA 2007, Sch 24, the provision was clearly VATA 1994, s 60.
However, Sch 24 introduces an entirely new regime, and Sch 24 para 29 states that s 60 (among others) is ‘omitted’ (which presumably means repealed). Turning to the statutory instrument, which brings Sch 24 into force (SI 2008 No 568), Article 2 makes it clear that, for this sort of matter (a dishonest error in a VAT return), the commencement date is 1 April 2008.
However, the statutory instrument explicitly goes on to provide (in Article 3) that no penalty under the new schedule can be levied prior to 1 April 2009.
Therefore there is exactly a one-year ‘gap period’.
On this point being made to them, HMRC’s response was that Interpretation Act 1978, s 17 provides that where an Act repeals the previous enactment and substitutes provisions for the enactment repealed, the repealed enactment remains in force until the substituted provisions come into force.
However, our counter argument, on which HMRC have not reverted to us, is that the Sch 24 regime replaces the s 60 regime without any break on 1 April 2008; it is simply that part of the Sch 24 regime is explicitly that no penalty for certain types of offence can be raised before 1 April 2009.
It is worth considering whether anyone has been issued with a substantial enough penalty between these dates to make this point worth arguing.
Readers’ feedback would be welcomed.
Alan Pink, Alan Pink Tax
