Add gelatin powder to small bowl and mix with 3 tablespoons of water. Let sit for about 5 to 10 minutes until softened, and thickened.
In medium saucepan, add heavy cream and sugar and cook over medium heat stirring often, until a low boil starts. Remove from heat, then add vanilla, and stir in gelatin until smooth.
Keep panna cotta in saucepan and let cool to lukewarm. Once cool, stir well before pouring mixture into 6 to 8 individual ramekins. Then place them in fridge until set, at least 3 hours to overnight.
Right before serving, make caramel sauce. Stir sugar and ½ cup water in large saucepan over medium low heat until sugar dissolves. Increase heat to medium high, boil mixture without stirring until syrup turns deep amber, about 12 minutes. Occasionally, swirl pan and dip pastry brush into bowl filled with water and brush sides of pan with it
When syrup is browned, remove from heat and whisk in room temperature butter until fully combined.
Then gradually add heavy whipping cream and stir in, mixture will bubble vigorously. Make sure cream is at room temperature and not cold to prevent caramel sauce from seizing up.
Once panna cotta is set, top each ramekin with layer of caramel sauce and serve.