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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Factors that may affect the penalty: When to inhibit a misdeclaration penalty

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

A misdeclaration penalty (MP) inhibit signal should be set when:

  • an acceptable voluntary disclosure has been made
  • a reasonable excuse exists for the error
  • one of the relaxations exists
  • the assessment forms part of a fraud investigation where a civil evasion penalty may be imposed
  • the trader is insolvent.

You should consider the MP inhibit on every assessment raised. The fact that MP may not be triggered on that particular assessment is irrelevant.

The MP inhibit is set by inserting a “1” in the MP inhibit box on the VAT 641. If the inhibit needs to be set after the assessment has been issued then a VAT 643 should be completed. Inhibits are not required on over-declaration lines of an assessment as these are automatically MP liable credits.

MP inhibits should be countersigned by one grade above the person raising or amending the assessment.