If your company makes a deliberate VAT mistake, which results in less VAT being paid over to HMRC than is correctly due, you as the director of that company can be issued personally with a penalty. This very rarely happens, but the VATman does have the power to impose such penalties where he can show the underpaid VAT was due to the dishonest conduct of one or more of the directors.
Two recent cases illustrate the types of situations where a personal penalty can be imposed:
Mr Brookes is the sole director of a building company. A VAT inspection found suppliers’ invoices to support VAT inputs were missing. Brookes obtained ‘copy’ invoices from the main suppliers, but those ‘copies’ were found to be very poor forgeries. Brookes was served with a personal penalty of £43,753 which was 60% of the over claimed VAT.
Mr & Mrs Walker failed to submit eight successive VAT returns for their company. The VAT office issued estimated VAT assessments to the company which were less than the VAT eventually found to be due, and the Walkers did not challenge those estimated assessments. The Walkers were served with personal penalties totalling £194,214.