HMRC is charging the heaviest penalties on VAT return errors, with a 38% increase in the serious penalties issued for what it terms ‘deliberate’ errors in the last year, warned Lubbock Fine.

Deliberate VAT errors refer to cases where HMRC believes the business made an active decision to illegally underpay VAT.

This could be as a result of not declaring the correct VAT on sales or overclaiming VAT on costs which can result in fines of between 20% and 100% of the VAT owed.

The number of serious fines has increased to 2,781 in 2023-24 from 2,011 the previous year. In total, HMRC handed out £153m in fines across 46,376 penalties in the past year as it cracked down on deliberate errors.

Jas Dhillon, VAT partner at Lubbock Fine, said: ‘HMRC is getting tougher with its VAT fines and issuing a growing number of its most serious penalties. It’s difficult not to conclude that it’s a concerted effort to bring in more cash. 

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