Larger businesses in the South could appeal VAT penalties for late returns if the fines are disproportional to the error.
A recent case, in which one of the largest multi-media companies in the UK successfully appealed a default, provides aggrieved firms with a chink of financial light.
Smith & Williamson, the accountancy and investment management group, says the result paves the way for local companies to contest costly surcharges.
Trinity Mirror Plc appealed against a default surcharge levied by the HM Revenue & Customs on it being one day late in filing its VAT return and paying the VAT due.
Tribunal experts concluded that the surcharge was disproportionate and, as it did not have the power to reduce the fine, its only option was to discharge the penalty.
Initially assessed at £95,900, the surcharge was reduced to £70,909 following a voluntary disclosure concerning an overpayment of VAT in the relevant VAT period.
Rebecca Combes, partner and head of business tax at the South Coast office of Smith & Williamson in Southampton, said: “The decision sends a clear signal to aggrieved businesses who believe they have faced a default surcharge that has been disproportionate to the situation – they should consider appealing their case.
“In an age when we are seeing a growing number of automatic tax penalties, it is right that they should be appropriate to the error.
“This latest case is likely to be of most relevance to larger businesses who just overshoot a deadline and face a relatively large fine as a result.
“The Trinity case is the latest in a series of cases that underline the need for fines to be appropriate to the situation. As always, it is best that companies seek professional advice.”
If taxpayers are to appeal an automatic penalty or surcharge, they should typically do so within 30 days.
VAT is a tax charged on most goods and services which VAT-registered businesses provide in the UK – the standard is 20%.
Rebecca advises on all aspects of business tax, in particular the taxation of intangible assets and intellectual property rights as well as the tax issues facing shareholders, directors and employees.
