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HMRC internal manual

Compliance Handbook

Penalties for Failure to Notify: Calculating the penalty: Potential Lost Revenue: VAT Registration

Where a person has failed to notify liability to be registered for VAT, the potential lost revenue (PLR) is the amount of VAT for which the person is liable for the period from

  • the date on which the person should have been registered, to
  • the day before

    • the person notified us of their liability to be registered, or
    • we otherwise became aware that the obligation should have been met.

Allowable deduction

  1. Where appropriate, the PLR is reduced by the amount of tax paid in another EU member state in relation to
* an acquisition of goods from another member state, or
* distance sales made to the UK.


Francine makes taxable supplies of acquisitions from other EU states and exceeds the registration threshold on 30 April 2013. She notifies her liability to be registered to us on 1 July 2014.

Francine is registered from 1 June 2013, which is the effective date of registration.

PLR is the VAT to which Francine is liable for the period 1 June 2013 to 30 June 2014 inclusive. This is also the penalty period. However, she may deduct from the PLR the amount of VAT paid in other EU member states in relation to the acquisition supplies made in the penalty period.

  1. Allowable deductions for tax on stocks and assets

Under VAT regulation 111 of the VAT regulations 1995, we can allow a taxable person to treat tax incurred on goods on hand at the effective date of registration (EDR), and on services connected with the business within 6 months preceding the EDR, as if it were input tax, see VIT32000.


When you calculate the PLR for a person’s (P)’s failure to notify, you do not take into account any tax overpaid by another person because of P’s failure. The only exception to this is where that other person is allowed to adjust their tax liability by reference to P’s liability. There is an example of this at CH72640.

FA08/SCH41/PARA7 (6)