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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
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Penalties for VAT and Excise Wrongdoing: Other penalty issues: Interaction with other penalties: Misuse of and supply of product penalties not to exceed 100%

It is possible for an amount of potential lost revenue to attract more than one penalty in respect of the use and supply of products that attract a higher duty.

Where the same misuse of a product, see CH91050, leads to a penalty for

  • using a product for a purpose that attracts a higher rate of duty, CH91400 and
  • supplying a product knowing that it will be used for a purpose that attracts a higher rate of duty, see CH91450

the total penalty cannot exceed 100% of the potential lost revenue, CH94250.

Example

Alistair sells oil to householders for their domestic heating. He pays duty on this oil at the rebated gas oil rate. He also sells this oil to his friend George. Alistair knows that George uses the oil to run the small motor launch he keeps at the local marina. The fuel George uses should be subject to excise duty at the higher heavy oil rate.

George is liable to a penalty for using a product for a purpose that attracts a higher duty, see CH91400. Based on George’s deliberate behaviour and prompted disclosure, you determine the penalty at 45% of the potential lost revenue (PLR).

Alistair is liable to a penalty for supplying a product knowing that it will be used for a purpose that attracts a higher duty, see CH91450. Based on his prompted disclosure, (the penalty for this wrongdoing is 100% subject to reduction for disclosure) you determine the penalty for this wrongdoing at 70% of the PLR.

The potential lost revenue is the same for both George and Alistair - it is the full duty payable on the fuel. The total of the penalties charged on George and Alistair cannot be more than the PLR therefore each penalty is reduced rateably as follows.

George 45/115 x 100 = 39%

Alistair 70/115 x 100 = 61%

If the penalty levels were determined at 35% for George and 60% for Alistair there would be no reduction because the total penalty does not exceed 100% of the PLR.

FA08/SCH41/PARA15 (3)