It has been revealed that half of all VAT fines issued against businesses by HMRC are mistakes.

Of the 17,200 fines given out in 2013, issued for late payment of VAT fees, 49% were incorrect and subsequently overturned after review. And this isn’t the first time.

The automatic system used to issue fines if a VAT return is sent in passed the deadline is clearly having problems. The accountants UHY Hacker Young say that it disregards circumstances and then leaves it up to the business to launch an appeal to get the fine rescinded.

Highlighting more mistakes made by the taxman, this comes as HMRC has been given new powers to take money from bank accounts with no external checks, even before a mistake has been proven.

Simon Newark, Partner at UHY Hacker Young said: “HMRC’s late filing system starts off with the premise that the taxpayer is wrong – you then have to prove your innocence. That’s perceived by taxpayers as being unfair, but unfortunately, that’s what the law says.

“With HMRC ultimately admitting that half the fines levied are overturned on appeal, something is going wrong. HMRC has been taking a much harder line on VAT appeals in general in recent times, so they will only overturn penalties where the taxpayer has an overwhelmingly clear-cut case.

“In a lot of ‘borderline’ review cases, where we feel the taxpayer should be given the benefit of the doubt, HMRC is now rubber-stamping the automatic penalty.

“Taxpayers should be allowed to explain their situation first before they are railroaded into a system of fines and penalties.”