Penalties for VAT and excise wrongdoing: overview
Most people comply with tax law but there are some who don’t. We have financial penalties to encourage these people to meet their legal obligations.
From 1 April 2010 a new penalty regime applies where a person
- makes an unauthorised issue of an invoice showing or including VAT
- misuses a product so that a higher rate of excise duty is payable, or
- handles goods subject to unpaid excise duty.
We will not charge a penalty if we are satisfied that the person
- has a reasonable excuse for a non-deliberate act, and
- if the excuse has ended, has remedied the act without unreasonable delay.
The amount of the penalty is a percentage of the VAT shown on, or included in, the invoice or the extra excise duty due. The percentage is determined by the behaviour that led to the act - higher penalties are payable if the act was deliberate.
Reductions in the percentage penalty are given for disclosure and depend upon
- whether the disclosure is unprompted or prompted, and
- the quality of the disclosure.
We will issue a penalty assessment. The person is entitled to a review of, and can appeal against, our decision
- that a penalty is payable, and/or
- the amount of the penalty.
Where necessary the appeal will be heard by the tribunal.
We can agree to a special reduction of the penalty in special circumstances.
The legislation for the VAT and Excise wrongdoing penalty regime is in FA08/SCH41. Schedule 41 also provides a penalty where a person fails to comply with a relevant obligation. Further guidance on this penalty is at CH70000+.
The penalty provisions in TMA70/S100-103 do not apply to a penalty under FA08/SCH41.
When where goods have been seized at importation from outside the EU, see CH91200.
There are also specific rules covering
- how the penalty provisions apply in relation to agents and companies
- what happens if a person incurs a penalty for VAT and Excise wrongdoing and another penalty on the same tax.