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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: Computer error

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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 following questions should be addressed when considering reasonable excuse

  • What checks took place between transcribing figures from the computer outputs to the VAT return?
  • Did the error occur in a newly installed system, or an established system?
  • If it was a new system, had the installation been well researched and supervised, or was it badly thought out and done too quickly?
  • Were manual records being kept to test the accuracy of the new system?
  • Was this a one off error or were there recurring problems?
  • If it is an established system, had it been error free in the past?
  • Was the problem a hardware/software error or simply an operator error?
  • How well were the operators trained and how closely were they supervised?
  • How secure was the system from outside influences such as power cuts, and were there any procedures in place to test the system for corruptions after such an event?

    • Was there a back-up system?
    • Had the software been amended by the taxable person?