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ACCA Applied Skills · Taxation (UK) · Penalties for non-compliance

Omar's VAT return showed £15,000 less VAT payable than the correct figure because he deliberately falsified purchase invoices and hid the falsification. HMRC discovered it, so the disclosure was prompted. What is the range of penalty HMRC may charge?

The penalty range is £7,500 to £15,000. Deliberate and concealed errors carry a maximum of 100% and a prompted minimum of 50%, applied to £15,000 of understated VAT. The 30% unprompted minimum and the 20%/70% rates for non-concealed behaviour do not apply.

  1. A£4,500 to £15,000
  2. B£7,500 to £15,000Correct
  3. C£3,000 to £10,500
  4. D£2,250 to £4,500

Explanation

Deliberate and concealed behaviour has a maximum penalty of 100% and a prompted minimum of 50%. This gives £7,500 to £15,000. £4,500 is the 30% unprompted minimum, which is wrong for a prompted disclosure. The £3,000 to £10,500 range uses 20% to 70%, which applies to deliberate but not concealed behaviour.

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