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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Belated Notification Penalty: Calculation of a penalty: Calculation of a penalty assessment

Belated Notification Penalty has been replaced by the Failure to Notify penalty introduced by Schedule 41 of the Finance Act 2008.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

  • trader’s calculation of ‘relevant VAT’
  • the trader’s turnover, or
  • HMRC Officer’s assessment.

The trader is asked to provide a calculation of ‘Relevant VAT’ in the belated notification penalty letter.

If the trader does not respond within 30 days of the penalty letter, unless an HMRC officer has assessed the ‘relevant VAT’ an estimate should be made on the other evidence available (usually turnover) and a penalty assessment made.

If the trader provides a calculation of ‘relevant VAT’ which is acceptable or an HMRC officer has assessed ‘relevant VAT ‘, you should calculate the penalty at the appropriate percentage, see VCP10455, of the net tax liability (relevant VAT) OR £50 if greater.

If the trader fails to respond to the penalty letter, in the absence of more accurate information, you should calculate the net tax liability by applying the following formula.

Number of days in period of failure


  Amount entered on box 23 of VAT 1 (consider as tax inclusive) x VAT Fraction see note below  = Net tax ‘y’

Note: The VAT fraction has been 1/6 since 04 January 2011.

The penalty will be the appropriate percentage, see VCP10455, of ‘y’ or £50, whichever is the greater.