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HMRC internal manual

VAT Civil Penalties

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Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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