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HMRC internal manual

Compliance Handbook

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HM Revenue & Customs
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Penalties for inaccuracies: calculating the penalty: delayed tax - impact on potential lost revenue calculation: example - later return not yet due

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

Example 1 - VAT claimed prematurely

Jennifer claimed VAT of £10,000 on a purchase in her 06/2015 return period, when she should not have claimed it until her 09/2015 period.

An officer discovered this careless inaccuracy in Jennifer’s 06/2015 return during an assurance visit on 10th August 2015. At this date Jennifer’s 09/2015 return was not yet due.

In the officer’s view, Jennifer’s systems would automatically have reversed the inaccuracy by not claiming the input tax again in 09/2015. Exceptionally, for this scenario the potential lost revenue (PLR) for the penalty for the 06/2015 period is calculated by reference to the rules for delayed tax inaccuracies at CH82390-2.

PLR=-£10,000 x 5% x 3/12 = £125

Example 2 - VAT declared late

In an assurance check on 15th December 2015, an officer identified that due to an accounting system problem Luke had carelessly not declared a VAT invoice dated 29th September 2015, showing VAT of £200,000, in his 09/2015 VAT return.

At the time of the assurance check Luke’s VAT return for the period ended 12/2015 was not due to be filed.

Knowledge of how Luke’s accounting system operates gives the officer confidence that the sale would automatically have been included in the later period thus reversing the inaccuracy in full. Exceptionally, for this scenario the potential lost revenue (PLR) for the period 09/2015 is calculated by reference to the rules for delayed tax inaccuracies, see CH82390-2.

PLR=-£200,000 x 5% x 3/12 = £2,500