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HMRC internal manual

VAT Civil Evasion Penalty

HM Revenue & Customs
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Assessment and notification of VAT civil evasion penalty: notification

It is the legal view that only the total amount due by way of penalty is required to be notified to the taxpayer.

In the Court of Appeal case of Nizar Bassimeh v Commissioners (1997) STC 33, Lord Justice Evans said,

“I would hold, therefore that a single penalty may be assessed and notified both to the taxpayer under section 13 (now section 60 of the VATA ’94) and to the company and its director under section 14 (now section 61 of the VATA ’94) which, although it has been assessed, i.e. calculated, by reference to separate tax quarters, nevertheless may be equivalent to the total amount of tax evaded during a period which includes more than one quarter”.

However, to inform the trader that a valid assessment has been made, it is both policy and practice that the notification of the penalty assessment must clearly show how the penalty has been calculated.

It is important that the penalty is notified to the correct legal entity and you should give particular regard to this where there have been changes in the legal entity during the period of evasion. Penalty assessments will need to be separately made and notified for each legal entity. A penalty assessment cannot be made which covers a period in which the entity is no longer in existence.