Civil evasion penalties for Customs, Excise and VAT: acts and omissions that create liability to a CEP for conduct involving dishonesty: VAT
The elements which must be proved to establish a liability to a civil evasion penalty under Section 60(1) of the VAT Act 1994 are:
- that a person has done a specified act or has omitted to take some specified action
- that the purpose in doing or omitting to do the act in question was to evade VAT and
- that the person’s conduct in connection with the act or omission involved dishonesty.
Evading VAT includes obtaining any of the following without entitlement to it
- a refund under any regulations made by virtue of Section 13 (5)
- a VAT credit
- a refund under Section 35, 36 or 40 of this Act or Section 22 of the 1983 Act and
- a repayment under Section 39
As well as a failure to register, a failure to render returns coupled with a deliberate payment of centrally-issued assessments can be dishonest conduct where the person knew that payment of the centrally issued assessments would not discharge their true VAT liability.
The fact that a person’s primary purpose in doing or omitting to do the act in question was not to evade VAT does not necessarily mean that a liability to a civil evasion penalty cannot occur. For example, if a person places false purchase invoices in the business records to cover up the fact that they have been stealing money from the business, liability to a civil evasion penalty may still be established if it can be proved that they knew their actions would result in a VAT evasion. If a person does something knowing that VAT will be evaded as a result, then it can be said that VAT evasion has become a purpose of their act.
For further details of this legislation, see CEP3150.