Where a VAT registered business entrusts an agent to act on their behalf, and an error occurs, who should HMRC hold as responsible?
HMRC’s internal guidance regarding penalties is contained in their Compliance Handbook. The guidance directs that “where an inaccuracy in a document has been made despite the person having taken reasonable care to get things right, no penalty is due.” According to the handbook this would include “acting on advice from a competent advisor which proves to be wrong, despite the fact the advisor was given a full set of accurate facts”.
In cases where an agent is acting on another’s behalf, HMRC officers would focus on the behaviours of the person whose documents are inaccurate, meaning that the actions under review are those of the taxpayer, and not the agent acting on their behalf.
However, if a taxpayer has provided all the information required to prepare a VAT return, their behaviour in asking a competent advisor to prepare that return would not demonstrate carelessness, and so, any penalty assessments should always be challenged.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.