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HMRC internal manual

VAT Civil Evasion Penalty

Appeals and precedents for VAT civil evasion penalty: grounds for appeals

Grounds for appeal are against:

  • assessment of tax arrears
  • the liability to a penalty
  • the level of a penalty
  • directors’/managing officers’/managing members’ liability
  • amount apportioned to a ‘named officer’.

If a taxpayer disagrees with the imposition or amount of a civil evasion penalty they have the right to write to us and tell us why and send us any relevant further information.

When we notify them of our decision we should offer them a review and tell them about their right of appeal to an independent tribunal. They will then have 30 days to either

* accept the review offer or
* appeal to an independent tribunal. 

Reviews will be done by a member of staff who is not involved with the original decision. If they disagree with the review decision, they will still have the right to appeal to the tribunal after the review is concluded.

An individual to whom liability for payment of the S60 penalty was transferred to them under S61, may raise an issue as to whether or not the penalty was properly imposed on the corporate body in the first place under Section 60. Where the taxable person that the S60 penalty has been levied against has become insolvent, and the liquidator does not wish to bring an appeal against the S60 penalty, tribunal decisions have varied as to whether the person subject to the S61 notice can still bring an appeal against the underlying S60 penalty.

Our current view in respect of reviews is that Section 61 notices served are ‘parasitic’ on the Section 60 penalty assessments (Section 61 operates to enable the Commissioners to apportion all or part of a Section 60 penalty to, for example, a particular director, therefore effectively making that director liable for the Section 60 penalty). Consequently, the person subject to the S61 notice is directly affected by the S60 penalty assessment and accordingly should have sufficient interest to challenge whether the underlying S60 penalty assessment was properly imposed.

Where both the company and the director/managing officer appeal to a tribunal, a joint appeal may be heard.