Misdeclaration penalty: Factors that may affect the penalty: Redundant traders
Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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.
Since the main aim of a misdeclaration penalty (MP) is to increase trader compliance, there is no useful purpose in imposing a MP on redundant traders.
For that reason there is no need to manually calculate or increase MP in these cases. If a redundant trader discloses an over-declaration of tax for a period which has already been assessed for MP, you should manually re-test for a penalty.
Any reduction or withdrawal of the penalty should be notified to the trader and a copy of the letter maintained in the trader’s folder.