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C J Palau & R C Loughran v HMRC

In C J Palau & R C Loughran v HMRC [2015] UKFTT 0038 (27 January 2015) the FTT found that HMRC was not entitled to impose a penalty for filing the wrong form.

The appellants owned property which they decided to convert into two separate flats and planned to sell in the hope of making a profit. They (wrongly) thought that they were entitled to a VAT rebate under the DIY housebuilder’s scheme (VATA 1994 s 35) and duly submitted the relevant form (VAT431NB).

HMRC contended – and this was accepted – that the appellants were not entitled to make use of the scheme as they intended to resell the flats. HMRC therefore imposed an inaccuracy penalty (FA 2007 Sch 24). It contended that it was the filing of the form itself which constituted the inaccuracy. The appellants argued that there had been no loss to HMRC ...

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