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HMRC internal manual

VAT Assessments and Error Correction

Interaction with inaccuracy penalties and importance of avoiding delay

Officers should be aware that it is HMRC policy to aim to raise and issue a VAT assessment and penalty assessment at the same time or soon after.

Guidance contained in CH83040 provides further background information on this approach.

It is inevitable however that there will be instances where this is not possible. This can happen where, for example we are still considering whether a penalty is payable or where behaviours to enable the calculation of the amount of the penalty have not yet been established.

  • deadlines under sections 73(6)(a) or 73(6)(b) VATA 94 are imminent or,
  • deadlines under sections 77(1)(a) or 77(4) VATA 94 are imminent or,
  • a pre-repayment credibility query has been verified and a reduction letter has to be issued to the trader.

This list is not exhaustive and there will be other instances where HMRC’c cannot be met. Where it is not possible to issue the penalty assessment at the same time as the VAT assessment you must consider the protection of the tax as your priority and issue your assessment or repayment reduction letter without undue delay as required by VAEC6110.

You must however ensure that you remain aware of the time limits under paragraph 13 of Schedule 24 Finance Act 2007 for raising inaccuracy penalties and issue any penalty assessment at the earliest opportunity.