Tax  

VAT penalty may be applied to innocent advisers

VAT penalty may be applied to innocent advisers

Personal liability may be applied to innocent advice firm directors and company secretaries who had no knowledge that a VAT fraud had occurred under new penalty rules, a lawyer has warned.

The government is set to introduce "aggressive" legislation in the Finance Bill 2017 to set a penalty for participating in VAT fraud.

The legislation will be applied to businesses and company officers that know or should have known that their transactions were connected with VAT fraud.

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If HMRC considers that the company or its officers knew or should have known that its transaction was connected to the VAT fraud, it can impose a penalty on either the company or in a controversial move the company officers, including directors and company secretaries. 

Stuart Walsh, partner at international law firm Pinsent Masons, said: “Worryingly, personal liability may be applied to innocent directors and company secretaries who had no knowledge that a fraud had occurred.

"This is an extremely aggressive pursuit of innocent directors and company secretaries, who can now suffer personal liability in respect of a fraud carried out in their supply chain, by an unknown third party, of which they had no actual knowledge."

The new penalty is set to be a fixed rate penalty of 30 per cent for participants in VAT fraud.

This will be implemented following royal assent of the Finance Bill 2017.

Peter Chadborn, director at Plan Money, said: "This stance is not dissimilar to the obligation for advisers to comply with money laundering legislation.

"Likewise, the directors of adviser firms need to ensure that everyone in the firm, not just advisers, is aware of the obligations and the consequences of non-compliance.

"It seems reasonable for a penalty to be imposed on the company but unless there is systemic VAT fraud it feels unreasonable to impose a penalty on company officers or directors personally."