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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: General principles of mitigation

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

When considering mitigation you should always be aware of the following general principles:

  • “Right tax at the right time” remains the foundation of compliance strategy, and sympathy is not the basis for mitigation. Only the largest or large and repeated errors trigger liability to penalty. Such errors are prima facie evidence of lack of care.
  • The discretion to mitigate should be used positively. The introduction of mitigation was recognition of the fact that reasonable excuse has proved too inflexible to produce fair results in all the circumstances that can occur.

There is a tension between these two principles, but mitigation is no different from any other activity in which officers must find a balance between their role as revenue officers and their obligations to provide a service to traders.