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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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Belated Notification Penalty: Calculation of a penalty: What is relevant VAT

Belated Notification Penalty has been replaced by the Failure to Notify penalty introduced by Schedule 41 of the Finance Act 2008.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.

The amount of the belated notification penalty will be determined by what is known as the ‘Relevant VAT’ in accordance with the VAT Act 1994, Section 67(3).

This means, a penalty will be due in respect of a person’s failure to notify any of the following at the proper time, and will be calculated as follows. If the trader

  • Has a liability to registration, the net VAT for which the person is liable for the period

    • beginning on the effective date of registration (EDR), or from the 25 July 1985 if later, and
    • ending on the day before the date on which HMRC received notification, or the day before the date on which HMRC become fully aware of the liability to register.
  • Has a change in the nature of supplies or a material alteration in the proportion of zero rated supplies affecting exemption from registration, any net VAT, which, but for exemption from registration, the person would be liable for in the period

    • beginning on the date of change or alteration, or 25 July 1985 if later, and
    • ending on the day before the date notification is received, or the day before the date on which HMRC otherwise became fully aware of the liability to register.
  • Is exempt from registration any acquisition supply which is not zero rated, any VAT which but for exemption from registration the person would be liable for

    • beginning on the date the acquisition was made, and
    • ending with the day before the date on which HMRC received notification of the supply or otherwise became fully aware of the supply.

Note: There is no capping limit on the applicable period for the belated notification penalty. There is no 20 year limit. The applicable period starts on 25 July 1985.

Note: If a trader requests an earlier EDR prior to the date that the trader is legally required to register (compulsory EDR) and this is accepted by HMRC the EDR should be taken from the compulsory EDR for the purposes of the belated notification penalty.