Unaccustomed Wealth Has its Pitfalls – Get Professional Advice!
Some people are lucky enough to become rich through inheritance – but one case in which a woman received a £200,000-plus penalty for paying a tax bill a week late showed that unaccustomed wealth has its pitfalls and that dealing with it requires professional advice.
The woman had inherited a plot of land from her father that she subsequently sold for £10.3 million to a property developer. Approximately £1.45 million in VAT was due on that transaction but the bill was settled eight days late. HM Revenue and Customs’ response was to impose a late payment penalty of £217,701, that sum representing 15 per cent of the total VAT due.
In challenging the penalty before the First-tier Tribunal (FTT), the woman said that she had been exceptionally over-stretched in her working life at the time. Her past VAT bills had never exceeded £4,000 and, although she had paid late in the past, penalties imposed had only been around £100.
Arguing that the penalty was plainly unfair and disproportionate, she pointed out that she was not a sophisticated property company. In dismissing her appeal, however, the FTT noted that paying tax on time had plainly been very low down her list of priorities. Whilst acknowledging that the penalty was ‘very, very large’, it found that she had not acted as would be expected of a responsible trader and that she had no reasonable excuse for the tardy payment.