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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: misdeclaration penalty for large errors in a single VAT accounting period: errors on a VAT return

Errors on VAT returns

Establish the gross amount of tax (GAT), see VCP10731, declared on the VAT return. This is the output tax plus the input tax as stated including acquisition tax.

  • Identify all under-declarations and over-declarations for the VAT accounting period from all VAT 641s and VAT 642s. Adjust the GAT on the return as follows for:

    • under-declarations of output tax increase the GAT,
    • under-claims of input tax increase the GAT,
    • over-declarations of output tax reduce the GAT,
    • over-claims of input tax reduce the GAT.
  • Identify all under-declarations that have not had the misdeclaration penalty (MP) inhibited and then deduct all over-declarations for the period. This is the “MP liable amount”. If this amount equals or exceeds £1m then MP is triggered.

If the MP liable amount is less than £1m then the following calculation is carried out:

  • MP Liable amount (see bullet two above) multiplied by 100, then
  • Divide that figure by the GAT (see bullet one above), which then
  • Equals the percentage

If the percentage equals or exceeds 30% MP is triggered subject to the de minimis limits.


The MP is calculated at a rate of 15% of the net VAT under-declared.