Penalties ― participating in VAT fraud

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at specific penalties which are targeted at those ‘participating’ in VAT fraud.

Penalties for participating in VAT fraud ― the basics

A specific civil penalty can be levied on a person for participating in VAT fraud. Certain conditions must be met before this penalty can be levied. Notably, it must be established that the person knew or should have known that the transaction in question was connected with the fraudulent evasion of VAT by another person.

The penalty is calculated at a rate of 30% of the ‘potential lost VAT’ but can be mitigated by HMRC in limited circumstances.

This penalty is an alternative to an inaccuracy penalty under FA 2007, Sch 24 and cannot be issued where a person has already been penalised with an inaccuracy penalty.

In some circumstances, penalties for participating in VAT fraud can be attributed to an officer of the company involved. HMRC also has powers to publish details of persons subject to this penalty regime.

In order to mitigate the risk of becoming

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