This is a short article to explain what HMRC have to prove in order to move a company VAT Penalty to the Director personally.

Firstly, they do not have to prove fraud was committed and only have to prove that you, or your accountant, submitted a VAT return that was known to be incorrect.

If a Director or accountant had all the information required and submitted a VAT return showing a VAT liability less than what they knew it should have been, this is obviously deliberate. HMRC will raise a VAT Assessment for the amount owed and a VAT penalty can be levied against the company for up to 100% of the VAT under-declared.

If the error was not concealed and a full admission offered to HMRC, that penalty can be reduced to 30%. However, if the company cannot pay the penalty, say due to insolvency, they will raise a ‘Personal Liability Notice’ against a Director personally for the full amount of the company penalty.

HMRC must write to an individual before they raise a personal penalty asking if there is any information that should be taken into account before they issue it. It is at this stage that you should seek specialist advice.