Legal status

Failure by HMRC to suspend a careless error penalty

The company submitted its only VAT return and incorrectly claimed £66 000 of input tax. No output tax was declared on the return. HMRC disallowed the claim and issued a careless error penalty for £11 800. It refused to suspend it on the basis that the company deregistered from 1 April 2014 so was unable to comply with any conditions of suspension.

The taxpayer appealed. It said it joined a VAT group in April 2014 so continued to have VAT obligations with which to comply therefore suspension should be granted. HMRC’s view was that when the taxpayer became part of a VAT group it was no longer VAT-registered as such. The VAT group representative was treated as carrying on the business of the group and only it was registered for VAT.

The First-tier Tribunal disagreed with HMRC. It said...