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HMRC internal manual

Compliance Handbook

Penalties for VAT and Excise Wrongdoing: Calculating the penalty: Reducing the penalty: Introduction

The penalty chargeable for a VAT or excise wrongdoing is calculated by applying an appropriate percentage to the potential lost revenue (PLR), see CH94250.

The maximum penalty percentage, see CH94100, can be reduced depending upon the quality of disclosure, CH94850. A person makes a disclosure by

  • telling us about it (telling), see CH95000
  • helping us to quantify the amount shown as VAT or duty due because of the wrongdoing (helping), see CH95050
  • giving us access to their books and records for the purpose of checking how much shown as VAT or duty due is unpaid because of the wrongdoing (giving access), see CH95100.

The penalty percentage can not be reduced below a minimum amount which is determined by

  • the type of wrongdoing, see CH93050, and
  • whether the disclosure is unprompted or prompted, see CH94650.

The minimum percentage for each type of failure is set out in CH94800.

FA08/SCH41/PARA12 (2)