In Stanley John Chmiel v HMRC [2018] TC7112 a company director’s failure to register his company for VAT resulted in a £4,250 penalty via a Personal Liability Notice. HMRC’s powers sometimes allow it to ‘pierce the corporate veil’.
- Mr Chmiel's building company traded above the VAT threshold between March 2011 and July 2012.
- The company failed to register for VAT.
- It ceased trading in 2016.
- Following a VAT visit HMRC issued the director with a Personal Liability Notice (‘PLN’) for £4,250.05.
The penalty for Failure to Notify is based on Potential Lost Revenue. It was calculated on the basis of:
'telling' (30%), 'helping' (40%) and 'giving' (40%) giving a final penalty of 35% of the Potential Lost Revenue from 1 March 2012 to 31 July 2013 (£12,143) x 35% = £4,250.05.
The director appealed. He claimed that his accountants had not advised him to register.
The FTT found that the company kept meticulous records: the director was obviously aware of turnover levels. It found that the failure to notify was deliberate and not concealed.
The appeal was dismissed.
Useful guides
At a glance: VAT Penalties
A summary of vast array of different penalties that may apply to VAT registered trader.
Penalties: Failure to Notify
A tax penalty applies when a person fails to notify HMRC that they are chargeable to tax.
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