The issue

VAT investigations are always stressful for individuals and potentially damaging to the business. HMRC can prosecute businesses and individuals who they accuse of deliberately under-declaring VAT and/or other taxes. Penalties may in certain circumstances be levied directly against Directors, Company Secretaries and even Managing Officers of businesses where HMRC successfully establish direct culpability.
In most cases, however, the matter is dealt with by Civil procedures under Code of Practice 9 (2005) under which the maximum penalty for a deliberate failure to properly account for VAT in Civil proceedings is 100%. However, this can be reduced to as little as 20% in mitigation, depending on the circumstances and the co-operation given by the business. Nowadays, a parallel investigation will be carried out into direct tax matters such as PAYE or Corporation Tax.

Action required

Maintaining control of the process can only be achieved by obtaining the correct advice at an early stage since the level of penalty depends on co operation from the start. Poor advice can result in substantially higher penalties and assessments than are necessary. Members of our team are ex-HMRC Investigators with 35 years experience between them and are thus well-placed to advise clients on procedures, interviews, preparing disclosure reports and negotiating settlements. We can also provide technical assistance to solicitors and accountants whose clients are involved in these investigations.

Example

One client was under investigation before he approached us and had already been interviewed twice for suspected VAT evaded of £800,000. We dealt with HMRC directly and carried out a counter investigation. Proving to HMRC that our client was innocent, we were able to redirect the investigation and no assessment or penalties were raised against our client.