Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
, see all updates

Default Surcharge: Calculation and notification of the surcharge: The Surcharge Liability Period

If a trader defaults on payment for the first time within a 12 month period, a Surcharge Liability Notice (SLN) is issued in accordance with Section 59 (2) VAT Act 1994 or for POA traders, Section 59A (2) VAT Act 1994.

The SLN warns the trader that a further default in respect of a prescribed accounting period ending within a defined period (the “Surcharge Period”) may incur a liability to surcharge.

The Surcharge Period commences from the date of the SLN. It expires 12 months from the last day of the accounting period in which the latest default occurred (not the due date).

The following is an example of how this works

An SLN is issued on 1 August 2007 for a default in respect of period 03/07


Default in Period SLN issued on Surcharge period
03/07 1 August 2007 1 August 2007 to 31 March 2008

A surcharge cannot be applied if a default has been recorded in 06/07, because the end date of the period is before the start date of the SLN. The first period eligible for a surcharge assessment is therefore 09/07.

Note: Traders will only enter the default surcharge system if they default on payment. No SLN is issued where a trader only defaults because the return is submitted late (for example submits a repayment or nil return or pays the tax due on time but submits the return late).