HMRC have published a response to their 2016 consultation on ‘A penalty for participating in VAT fraud’.
The consultation had made the following proposals:
- A new penalty would be issued at the same time as the underlying fraud is addressed
- No distinction would be made between whether the business knew, or should have known, of the fraud.
- The penalty could be:
- A fixed 30% for all cases
- A fixed 25% increasing to 50% if, on appeal, it is found that the business had knowledge of the fraud.
- No reduction for disclosure of information would be offered
- Company officers could be personally liable if they knew of the fraud.
Alternative ideas were invited as part of the consultation.
In their response HMRC confirm that a new penalty for participating in VAT fraud will be introduced in 2017:
- The penalty will be a fixed rate 30% which will align more neatly with the ‘knowledge principle’.
- No distinguishing will be made between actual knowledge and cases where they should have known.
- The penalty will be transferable to a company officer where they knew or should have known of the fraud.
- HMRC will have the option to ‘name and shame’ those penalised where the VAT at stake is more than £50,000.
- No reductions will be given for disclosure, making the penalty simpler and less prone to challenge.
Draft legislation introducing the rules has been included in the Finance Bill 2017 and will take affect from Royal Assent.
Our subscriber guide:
The response document and original consultation can be found here.