For the previous three value added tax (VAT) quarters, E-Commerce plc has been late in submitting its VAT returns and in paying the related VAT liabilities. The company is therefore currently serving a default surcharge period.

As part of your firm’s tax audit for the year ended 31 March 2014, you have discovered that E-Commerce plc has been careless in incorrectly treating the supply of standard rated services received from VAT registered businesses situated elsewhere within the European Union. This careless incorrect treatment has resulted in an underpayment of VAT to HM Revenue and Customs of £8,200 for the year ended 31 March 2014.

Required:
(iv) Advise E-Commerce plc as to the maximum amount of penalty which is likely to be charged by HM Revenue and Customs in respect of the underpayment of VAT of £8,200, and by how much this penalty would be reduced as a result of the company’s unprompted disclosure. (2 marks)