25,633 VAT penalties deemed unjust in 2011

HMRC has come under fire yet again after it was revealed that the department had issued a large proportion of incorrect VAT fines.

Accountants may be interested to learn that HMRC was found to be at fault in two thirds of the cases that were appealed last year. This has raised concerns that thousands more taxpayers may have received unjust penalties.

Simon Newark from UHY Hacker Young said he was astonished that so many VAT fines were overturned. HMRC seems to be throwing penalties around like confetti and it makes one wonder how many taxpayers have been incorrectly penalised and have not asked for a review.

Data collated by the accountancy firm shows that HMRC undertook 39,551 VAT penalty reviews in 2011. Of those, 25,633 decisions were found to be incorrect.

Taxpayers do not tend to question HMRC’s decisions because they expect the government department to get things right. The data suggests that it is extremely likely that thousands of people have paid penalties that have been incorrectly imposed.

Many taxpayers think that VAT officers are under pressure to maximise revenues and this has led to a marked increase in the number of fines issued. VAT regulations are complex and the majority of firms do try to comply with them, but if HMRC’s officers get it wrong, why should companies suffer, Newark added.

More depressing news for the taxpayer comes from the TaxPayers Alliance who says we will have to work for 208 days this year to pay for Government spending. This year, it will take till the end of July before our earnings are our own rather than the taxman’s.

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