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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Misdeclaration penalty: Discretion, reasonable excuse, and mitigation: Determining the amount 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Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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.

Small degrees of mitigation are not effective

If mitigation is justified then to reduce the penalty by less than 10% is likely to be seen as trivial and an invitation to appeal to a VAT Tribunal. Also when considering whether to alter the degree of mitigation awarded, it will usually make sense to move in steps of 10%.

De minimis amounts

The £300 de minimis for MP does not apply to mitigated amounts. If you reduce a penalty below £300 it is still to be issued. If however the result of mitigation is to produce a penalty of less than £30, you should consider whether it is worth maintaining at all.

Trader requests additional mitigation

Having awarded a degree of mitigation, the trader or his representative may present additional facts in order to increase the mitigation allowed. Your original award represents a broad banding of the degree of reasonableness and it is not necessarily the case that more information automatically leads to more mitigation.

There is no formula for relating given circumstances to a particular degree of mitigation but for more guidance, see VCP10798.