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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: Misdirection

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

Misdirection can be either a positive act or an omission.

  • Where an assessment is not issued due to accepted misdirection, then a misdeclaration penalty (MP) and interest are no longer a consideration.
  • Where an assessment has been issued and it is later decided that the tax otherwise due is to be remitted on the grounds of misdirection, then the MP and interest are to be withdrawn.
  • Where an assessment is issued and misdirection is later accepted, but for whatever reason the trader decides to account for the tax, then the MP and interest are to be withdrawn.
  • Where misdirection is not accepted then the MP and interest remain due. However, you should still consider whether the trader’s actions were those of a reasonable businessman.