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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: Unacceptable or no evidence to deduct input tax

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

  • Did the trader hold documentary evidence which could reasonably have been accepted as alternative evidence for deducting input tax?
  • Was input tax credit taken with no supporting evidence?
  • In the absence of a proper tax invoice, could the trader justify using the date at which a claim to input tax had been made e.g. was a basic tax point used?
  • Was alternative evidence used to duplicate the claim to input tax?