Business Secretary Vince Cable admitted yesterday it was a “bit embarrassing” that his failure to pay a VAT bill of up to £25,000 on time “wasn’t spotted earlier”.
The Liberal Democrat Cabinet minister was hit by a £500 penalty from HM Revenue and Customs (HMRC) after the blunder over tax on his media work.
Mr Cable insisted that he made no attempt to avoid tax and the “oversight” had happened in good faith.
It followed earnings in a lucrative period before he became a Minister when he is said to have made a considerable sum from media work and book deals.
He earned an estimated £192,000 on top of his MP’s annual salary of £65,738, but did not tell HMRC that his income had exceeded a pre-set threshold.
HMRC rules state that if a person’s turnover of VAT-liable goods and services over a 12-month period exceeds the current threshold of £73,000, they must register for the duty within 30 days.
Mr Cable said: “I have not avoided paying tax. I paid in full, all that was owed. The tax accountant has made a statement making this clear.
“I approached HMRC unprompted, as soon as I realised I was liable for VAT on my earnings for 2009-10.
“The tax was paid in full and the matter closed within four weeks.
“HMRC waived 50 per cent of the fixed penalty for late notification in recognition of the fact that I did approach them unprompted and my oversight was in good faith.
“I made no attempt to avoid tax – in fact I made every effort to pay what was outstanding as soon as it became clear I was liable for VAT.
“It’s a bit embarrassing that this wasn’t spotted earlier. None of this will stop me talking out against tax avoidance.”
Since joining the Government in May last year he has cut back on such freelance work.
The error was spotted by his accountants in January while his tax return for the previous financial year was being finalised.
The accountants notified HMRC officials and apologised, before offering to pay any due tax.
The former deputy leader of the Liberal Democrats was then billed for a figure of “less than £15,000” after a rebate on his charity donations was taken into account. He is said to have sent a cheque to the Revenue by mid-February to make up for the shortfall, and was let off with half the usual penalty of £1,000.