Late registration penalty

The taxpayer was a solicitor who set up a practice specialising as a criminal legal aid advocate. Following a Law Society routine audit in June 2011 he realised he should have registered for VAT in the previous November.

The outstanding VAT was £25 000. The taxpayers asked the Legal Services Commission to meet the output tax liability on his invoices. The body agreed to pay £18 000 but only after some delay.

The taxpayer registered for VAT in December 2011 and paid the £25 000 to HMRC making up the balance of £7 000 from his own resources.

HMRC imposed a late registration fine of £4 754 which the department later reduced to £2 502 it being 10% of the late-paid VAT. The sanction could have been reduced to nil had the taxpayer registered within 12 months of November 2010

The taxpayer appealed.

The First-tier...