The mistakes over VAT that land businesses in trouble

Making a VAT-related mistake can be costly. Not only will HMRC expect any outstanding VAT to be paid, but they might also levy penalties and interest.

A recent story involving an aesthetic clinic demonstrates the ways in which VAT mistakes can prove expensive.

In the July 2023 case, Illuminate Skin Clinics Ltd (ISC), a private clinic that offered aesthetic treatments, misinterpreted the rules and didn't charge VAT to clients, thinking that its treatments were VAT exempt (Lowery 2023 Jul 27). HMRC then visited the clinic and subsequently disagreed. They then raised an assessment for standard rate VAT at 20%.

The case went before the First-tier Tax Tribunal and HMRC won. The clinic was then left to pay VAT on treatments it had supplied without charging VAT to clients.

There are many common VAT mistakes that could easily get a business into hot water. In this piece, we will look at some examples and offer advice on how to avoid them.