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HMRC internal manual

VAT Civil Penalties

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Belated Notification Penalty: Reasonable excuse: Trader states there have been postal difficulties

Belated Notification Penalty has been replaced by the Failure to Notify penalty introduced by Schedule 41 of the Finance Act 2008. The Failure to Notify penalty applies to obligations to notify HMRC of a liability to be registered for VAT on or after 01/04/2010. The Belated Notification Penalty under Section 67 VATA 1994 continues to apply to obligations to notify a liability to be registered for VAT before 01/04/2010.

Please see the Compliance Handbook CH70000 for more details about the new failure to notify penalty.

Trader contacts HMRC within standard timescales

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If a trader claims they have sent a VAT1 Form to HMRC which is not received by HMRC or they have asked HMRC for a VAT1 form which they allege they did not receive due to postal difficulties, you should consider all the circumstances of the case.

You may consider accepting reasonable excuse due to postal difficulties provided

  • The initial enquiry asking for a VAT1 form is made to HMRC within the standard timescales for notification, or
  • The trader alleges that the VAT1 form was sent to HMRC within the standard timescales for notification.

The trader must also make the second follow up enquiry within 4 weeks of the first enquiry or within 4 weeks of the date the form VAT1 was alleged to have been sent to HMRC before reasonable excuse can be considered.

Reasonable excuse can be granted for the period following the second ‘follow up’ enquiry provided HMRC receives the VAT1 within 30 days of the second ‘follow up’ enquiry.

Trader contacts HMRC outside standard timescales

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  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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Reasonable excuse for a partial period - penalty is mitigated

A trader may be allowed reasonable excuse for the whole period they failed to notify or only on a partial period

If reasonable excuse is allowed only for a partial period the penalty is mitigated and there is still a liability to the penalty

The penalty letter should refer to mitigation rather than reasonable excuse to clarify the position.

Note: This is a developing area of policy. If traders ask for reconsiderations or appeal against our decision, you should contact the Central Policy Tax Administration Advice (TAA) team.