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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
Updated
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Charging penalties: establishing penalty behaviour: planning what questions to ask: VAT and excise wrongdoing

Often, when you have found a VAT or excise wrongdoing, discussed it with the person, and quantified the potential lost revenue, you will already have sufficient, if not all, of the evidence you need to decide whether the wrongdoing was non-deliberate, or potentially more serious.

Once you have established that there was a VAT or excise wrongdoing, the non-deliberate penalty applies unless the behaviour is deliberate or the person has a reasonable excuse for their wrongful act, see CH93300.

Where you consider the wrongdoing to be non-deliberate, the person should be given the opportunity to provide an explanation which could satisfy you that they have a reasonable excuse. Reasonable excuse does not apply where the VAT or excise wrongdoing is deliberate.

In VAT and excise wrongdoing cases involving potentially deliberate or deliberate with concealment behaviour, you will need to ask the person for more information, both to understand more fully how the wrongdoing happened, and to obtain evidence for a decision on penalty behaviour.

In these cases you can put your view to the person at the end of the check after getting approval if necessary, see CH407000 and CH408000.

When you intend to put the questions to the person in a face to face meeting, you should prepare the questions in advance so that you are clear on the facts that you need to establish and to make sure you do not forget to ask anything important during the meeting.

It is good practice to start by establishing important basic facts which will prevent later disagreements about how and why the failure to notify happened.

You can put your view to the person at the end of the check after getting approval if necessary, see CH407000 and CH408000.

Example

A supplier has failed to take the necessary steps to establish the credibility and legitimacy of their customers and has been discovered selling red diesel for use in a road vehicle. Red diesel has a lower rate of duty and is cheaper than diesel legally sold for vehicles using the road. The use of red diesel is restricted, for example to agricultural vehicles. Commercial hauliers who misuse red diesel can obtain a large commercial advantage over their competitors.

You can find other examples of questions to establish behaviour at CH402303 for VAT wrongdoing and CH402304 for excise wrongdoing.

Before you ask the person about their behaviour, you must issue the HRA and penalty factsheets and explain the process to them, see CH402350.