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Prompted or Unprompted disclosures - a timely warning


The VAT People - Expert Author

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23rd May 2013

The recent VAT Tribunal case of United European Gastroenterology Federation (“UEGF”) has outlined some of the questions regarding whether a disclosure is ‘prompted’ or ‘unprompted’ if it is made prior to an upcoming VAT inspection.

The UEGF had, across three VAT returns, made errors on both the input and output calculations that totalled £699,822. They have, it must be noted, conceded that the errors in question were ‘careless’. HMRC assessed for a penalty of nearly £105,000, based on their belief that the disclosure was “prompted” by the notification of a VAT visit. Based on the quality of the disclosure, HMRC had mitigated the value down as much as they could.

HMRC had arranged a VAT Control Visit to discuss the accuracy of one of the returns, and this was arranged before UEGF’s advisors had discovered that there was a problem with their returns. As such, UEGF argued that they would have made the disclosure irrespective of the control visit, and wished to have the disclosure marked as unprompted.

The Tribunal looked over the facts before them, and considered them in light of the legislation regarding the penalty regime. Whilst they found that UEGF had indeed made the move to make the disclosure, the notification of an impending visit was enough for the taxpayer to consider that HMRC would discover the error.

This serves as a warning that the time to make a disclosure to HMRC as soon as an error is discovered. If you hold off it may be that your client receives a routine visit notification and the most that you can do is to mitigate any penalty down to a minimum of 15% of the value of the error that has been made.

This demonstrates the importance of regularly reviewing your client’s VAT affairs and also submitting full disclosure reports to HMRC as soon as errors are discovered. The VAT People has successfully removed or substantially removed since the introduction of the current VAT penalty regime.

About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2013-06-11 11:09:29 in Tax Articles

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