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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: The Surcharge Liability Extension and notices

Whenever a default (either late payment or return) occurs within the period covered by a SLN, a Surcharge Liability Notice Extension (SLNE) is issued to the trader. The legal basis for this is Section 59 (3) VAT Act 1994, or for POA traders Section 59A (3) VAT Act 1994.

The SLNE extends the period of liability to surcharge until 12 months from the last day of the latest accounting period in default. A surcharge assessment may also be issued with a SLNE.

The following is an example of how this works
 

02/09/2015 1st default. A SLN is issued. The Surcharge Liability Period commences on the date of issue and ends on 30 September 2003.
   
03/09/2015 2nd default. The surcharge period is extended to 30 September 2004.

The following is a list of forms used to notify traders of defaults

  • VAT Forms 160 - 166 are used to notify traders of defaults
  • VAT 172 (A&B) is known as the Default Surcharge “Help Letter”
  • VAT 173 (A) is known as the Default Surcharge “Help Letter and Tax Assessment”.

 

VAT 160 (A&B) Surcharge Liability Notice (SLN) - Issued at the first payment default to set the surcharge liability period.

VAT 161 (A&B) Surcharge Liability Notice Extension (SLNE) - Issued on first or subsequent default (either late return and/or payment) within a surcharge period where no surcharge has been assessed (such as a late return or where the surcharge calculated at the 2% or 5% rates is less than £400).

VAT 162 (A&B) Surcharge Assessment and Surcharge Liability Notice Extension - Issued on the first or subsequent default within a surcharge period, to advise the amount of surcharge due and to extend the surcharge liability period.

VAT 163 (A & B) Supplementary Assessment of Surcharge - Issued to advise of an increase in a previously issued surcharge assessment.

VAT 163 C Advice of Reduction of Surcharge - Issued to advise a reduction in a previously issued surcharge assessment.

VAT 164 (A) Tax Assessment and Surcharge Liability Notice Extension - Issued to advise an assessment of tax and to extend the surcharge liability period.

VAT 165 (A) Tax Assessment and Surcharge Liability Notice - Issued at the first default to advise an assessment of tax and a surcharge liability period.

VAT 166 (A&B) Tax Assessment and Surcharge Liability Notice Extension - Issued to advise an assessment of tax and surcharge and to extend the surcharge period.

VAT 172 (A&B) Known as the Default Surcharge Help Letter - Issued to businesses with a turnover of up to £150,000 at the first payment default. This is not a legal surcharge document, but simply a notification of a default, an offer of help and advice that there will be consequences if tax is not paid or if there are further defaults.

VAT 173 (A) Help Letter and Tax Assessment - Issued to businesses with a turnover of up to £150,000 at the first payment default and combines a help letter and assessment of tax.