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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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Default Surcharge: Calculation and notification of the surcharge: When to issue a surcharge help letter

Default Surcharge Help letter

In June 2001 the Chancellor said that in future, automatic VAT fines will be levied only after a written communication is first sent offering advice and help to sort problems out.

A business with a qualifying turnover is likely to receive up to four separate offers of help to sort out difficulties before receiving a surcharge assessment. The four offers ofhelp will be

  • a new help letter (HL) - which will have the form number VAT172
  • an SLN
  • an SLNE 2% (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • an SLNE 5% (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

 

How the system will operate

If a business

  • has a qualifying turnover, and
  • is not currently in the surcharge system.

A help letter (HL) will be issued instead of an SLN when a default occurs. The issue ofthe HL will set an expiry date on the system, similar to the SLN expiry date. If a further default occurs before the HL expires, an SLN will be issued and then standard surcharge rules apply thereafter. If a default occurs after the HL expires and the business still has a qualifying threshold, another HL will be issued.

Qualifying turnover

The qualifying threshold for businesses is £150,000. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

A help letter will be issued for a first default on payment within a 12 month period if a business

  • has a qualifying turnover, and
  • is not currently in the surcharge system.

The issuing of a help letter sets an expiry date on the VAT mainframe, similar to the SLN expiry date. If the trader defaults, before the help letter period expires, an SLN will be issued and from then on the normal surcharge rules apply.

If a default occurs after the help letter period expires another help letter will be issued providing the business is still within the qualifying threshold.
 

Qualifying turnover Applies to
   
Up to £100,000 Defaults on payments due on or after 30 June 2001
Up to £150,000 Defaults on payments due on or after 31 December 2002

The Default Surcharge Help Letter - Form VAT 172 A&B

The help letter, form VAT172 is not a legal surcharge document but simply an advice of default, an offer of help, and an advice that there will be consequences if tax is not paid or if there are further defaults.

There is also an indirect version of the form VAT 172A, which is sent out for local issue under similar processing rules as for the VAT160A (indirect SLN) and also a VAT 172B for manual issue.

What happens if a central tax assessment is issued?

There is a version of the help letter which combines an assessment of tax. This is Form VAT173.