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ACCA Strategic Professional · Advanced Taxation (UK) · Value added tax

Harlow Ltd submitted a VAT return that understated VAT by £20,000 because of carelessness. Harlow Ltd told HMRC of the error before HMRC had any suspicion of it, so the disclosure was unprompted. Using the ATX-UK standard penalties for errors table, what is the range of penalty that can be charged?

The penalty range is nil to £6,000. For careless errors, the maximum penalty is 30% of the £20,000 understatement, which is £6,000, and the minimum for an unprompted disclosure is 0%. The 15% minimum applies only when disclosure is prompted.

  1. ANil to £6,000Correct
  2. B£3,000 to £6,000
  3. C£4,000 to £14,000
  4. DNil to £20,000

Explanation

Careless behaviour carries a maximum penalty of 30% and a minimum of 0% for unprompted disclosure. 30% x £20,000 = £6,000, so the range is nil to £6,000. £3,000 to £6,000 uses the prompted minimum of 15%, which is wrong for an unprompted disclosure.

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