VAT penalty for ‘deliberate and concealed’ underpayments

The taxpayer operated a vehicle hire business and registered for VAT as a sole trader from 1 February 2011. Her first VAT return for the long period to 30 September 2012 contained input tax errors of £37 228 and HMRC raised an assessment. The officer concluded that the errors related to ‘fake invoices’ for non-existent supplies so that the input tax claim was ‘grossly inflated’. As a result HMRC issued a substantial penalty for underpayments caused by ‘deliberate and concealed’ behaviour.

In addition the taxpayer made some serious allegations against her accountant including the decision to register her business as a sole trader rather than a limited company she owned as 100% shareholder called Burton Car Rentals Ltd. This was confusing: she registered for VAT in February 2011 but the company was not incorporated until March 2012. She also accused the accountant of embarking on...