Cable penalised for failing to register and pay VAT

Accountants will no doubt be aware that MPs are not infallible when it comes to filing their tax returns.

The latest person to fall foul of HMRC’s penalty regime is none other than Vince Cable, the business secretary. He has had to repay back taxes of around £15,000, plus a penalty charge of £500, for failing to register for VAT when his freelance income rose above the 2009-10 threshold.

In previous years, Cable’s freelance earnings were no more than about £50,000 – well below the VAT registration threshold of £73,000. However, his income shot up in 2009-10 and its thought he earned between £127,000 and £154,000 from freelance activities.

Cable’s accountants unearthed the oversight when they prepared his Self Assessment tax return and a settlement offer was made immediately to HMRC. The matter was cleared up within a month of HMRC being notified.

Failing to register for VAT could mean the offender receives a 5% penalty on the tax owing, as well as a penalty for failing to register with the Revenue. However, in the case of Mr Cable, the penalty was reduced by 50% because he made the disclosure unprompted and also co-operated fully with HMRC.

Tim Subhan, a partner at Cable’s firm of accountants, said the penalty reduction was normal when a full disclosure is made. However, the political fallout from this story could have a devastating effect on a minister who has been urging the government to clampdown on tax evasion.

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