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HMRC internal manual

VAT Civil Penalties

From
HM Revenue & Customs
Updated
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Misdeclaration penalty: Factors that may affect the penalty: Fraud

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after 01/04/2009. Misdeclaration penalty will still apply where the due date is before 01/04/2009.

Please see the Compliance Handbook CH80000 Penalties for Inaccuracies for further details.

The imposition of MP is not intended as a soft option for fraud or cases where fraud cannot be proved.

Because of the rules of double jeopardy, see VCP10808, a trader cannot be assessed for both an MP and a civil evasion penalty or prosecuted for the same under-declaration.

If you suspect fraud you should contact the Civil Investigation Team before issuing an assessment. If it is decided to pursue a fraud case and issue an assessment to recover the tax and interest, you must set the misdeclaration penalty (MP) inhibit on the Form VAT 641 (manually or electronically) against culpable arrears, even if it is obvious that the amounts would not trigger an MP. If you do not do this the amounts will be recorded as MP liable and any further assessment of tax for the period could trigger a MP.

If it is later decided to discontinue fraud action before a civil evasion penalty is issued or a prosecution notified, the MP inhibits can be removed by inputting a VAT 643. The mainframe will then re-test the new MP liable amounts against the penalty base to see if MP is triggered.