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Half of VAT penalties successfully appealed

24 January 2011

Over half of VAT penalties are overturned on internal review, according to statistics disclosed to accountancy firm UHY Hacker Young under the Freedom of Information Act. Today’s Financial Times reports that the taxman undertook 28,912 internal VAT reviews between April 2009 and September 2010, 16,270 of which were overturned.

“HMRC officers are handing out fines like traffic wardens hand out parking tickets,” Simon Newark, UHY Hacker Young’s VAT partner told the paper. “It would be understandable if a small percentage of fines were wrong, but these figures are staggering.”

However, HMRC responded by denying that staff were under pressure to hand out fines, arguing the majority of penalties were issued automatically and then altered if the taxpayer has an acceptable excuse.

“The internal review process is there because we are listening to our customers,” said HMRC in a statement. "It saves unnecessary hassle in the long run.”

"Only a small proportion of the millions of decisions we make each year are queried. Our decisions are based on the information we have at the time. Removing a penalty after someone gives a reasonable excuse for their lateness does not mean the penalty was wrongly levied, but that we accept the customer's excuse for the failure."

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