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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: Mitigation factors to consider

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

Mitigation is available at HMRC’s discretion and may be reviewed by a VAT Tribunal. Full delegation of discretion has been given to local offices.

Evidence of factors for considering mitigation can arise before or after a penalty assessment. For example, from

  • the visiting officer’s report - it is best practice for the visiting officer to note on the visit report any factors which may be taken into account when deciding if mitigation should apply;
  • a written request by the trader;
  • during a local reconsideration or review prior to a Tribunal.

When the decision to allow or reject mitigation has been made, all of the factors considered at the time the penalty was assessed, or during a subsequent review, should be clearly set out in any communication with the trader.

In making an assessment of the penalty, officers must be aware of the need to use their discretion and to allow mitigation if there are grounds to do so.

Like any discretion, mitigation must be considered in relation to the circumstances of each individual case and officers should not be unduly influenced by “precedent”. Provided officers make the judgement conscientiously and in accordance with this guidance, the fact that a Tribunal later comes to a different view is not a basis for criticism of the mitigating officer.

For guidance on

  • the general principles of mitigation, see VCP10794 
  • grounds for mitigation, see VCP10795 
  • reasons that are excluded from mitigation, see VCP10796 
  • determining the amount of mitigation, see VCP10797 
  • indicators to help you determine mitigation, see VCP10798.

For further information on mitigation factors and arriving at the amount of mitigation see the Mitigation Framework at VCP11700.