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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: Reliance on third party

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

  • Has the trader claimed reliance on a third party for all or part of their argument?
  • Has the trader fulfilled their responsibility to account for tax at the right time?
  • Can the provisions of section 71 be overridden by other reasonable excuse arguments such as illness of the “other person” which affects their ability to perform the task accurately?

The definition of an “other person” is any person outside the direct employment of the registered trader. The registered trader will be responsible for the acts of their employees.

The words “perform any task” includes the giving of advice by a professional adviser as well as the delegation of book-keeping/accounting duties.

Reliance on a third party is not excluded from the grounds for mitigation. You will need to consider whether such reliance was reasonable before allowing mitigation.