There have been many decisions released in the last few weeks in relation to late filing penalties and the various reasons why this has occurred. I will not set out any one case, but would seek to remind our readers, that excuses such as a reliance on an accountant or lack of knowledge or any similar reason, will only have a chance of success if you decide to appeal the penalty, if you have specific and documented evidence. For example reliance on an accountant does not reduce the taxpayers obligation to ensure returns are made and are correct. However, if reliance on the accountant was because the taxpayer had been incapacitated in some way and could not provide the required oversight, then if that incapacitation could be evidenced then there may be a chance the taxpayer has a reasonable excuse. It is likely as the COVID-19 crisis continues that late-filing penalty appeals by taxpayers will become common. Again, if late filing or late payments are directly linked to the pandemic the Court will wish to see direct evidence of COVID’S effect.
The FTT rejected the company’s appeal against HMRC’s refusal to allow input tax to be credited in relation to the purchase of plant and machinery. Nine purchases had been made from vendors who had subsequently become “missing” and who had not declared the VAT that had been charged on the sales. The FTT judged the Appellant either “knew or should have known”, that in eight of the nine cases there was a likelihood of fraud. No allegation is made against Peterborough Plant Sales, but as the end-user they have become responsible for the missing VAT. It is clear as these judgments are issued that if you are in a supply chain it is extremely important that you carry out due diligence to ensure that your counterparties are legitimate and competent especially when it comes to VAT. HMRC have issued new guidance on this and it is vital that traders affected obtain a copy and read it. They offer guidance on things you should do for your due diligence, but the onus remains on the taxpayers to use their judgement and to be able to demonstrate how they reached the decisions they made
This case has been recently released by the ECJ. It seeks to address some of the issues around the implementation of the Kittel principle. Although the case started in relation to a criminal investigation that went nowhere, the subsequent civil litigation where there was an attempt by the authority to withhold VAT it believed was connected to fraud led the Court firstly to say that if a taxpayer was denied access to information the tax authority held and which was material to the case, then any decision made may have to be annulled or reversed. Secondly, where VAT was withheld based on uncorroborated doubts the authority has about certain economic activity, should no longer preclude the deduction of VAT where a valid tax invoice is held. The ruling makes clear that a tax authority may require additional documents, but the only document it can require to enable the deduction of VAT is a valid tax invoice as it set out in the VAT directive.
Up to £3.5 billion could have been paid out in wrong or fraudulent claims for the Coronavirus Job Retention Scheme, the government suspects.
Jim Harra, the top civil servant at HMRC, said that his staff believe between five per cent and 10 per cent of CJRS cash might have been sent to the wrong places.
“We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between five per cent and 10 per cent,” the permanent secretary told MPs on the Public Accounts Committee.
Mr Harra said that an academic study has estimated that the level of fraud and error might be even higher than 10 per cent after the Government has so far paid out £35.4 billion in CJRS cash.
It is estimated that between £1.75 billion and £3.5 billion could have been distributed incorrectly.
80,433 employers have returned over £215million of furlough money to the government who found they did not need it or took it in error.
The loans were given to cover the salaries of their workers, according to figures from the HMRC.
The companies and other bodies have returned £215,756,121 as of September 15, according to data obtained by the PA news agency through a freedom of information request.
Some of the companies claimed smaller payouts the next time they were given furlough cash while others returned the money.
The overall figure that has been claimed as part of the coronavirus job retention scheme (CJRS) is around £35.4 billion.