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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Calculation and notification of a misdeclaration penalty: Summary of the system for notifying the penalty

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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 old regime for assessing a misdeclaration penalty (MP) was integrated with assessments of tax and interest and led to MP being automatically assessed by the computer.

Under the current system penalty assessments for periods beginning on or after 1 June 1994 will not be generated by the computer.

However the VAT computer system will continue to test periods for susceptibility, to penalty. Periods which breach the objective tests will be reported to local offices weekly for consideration and manual assessment of a misdeclaration penalty.

The Forms VAT655, 656 and 657 generated for periods assessed after 1 June 1994 will not reflect MP. In addition MP will not be reflected on the VAT667 which accompanies the tax assessment

But when subsequent events reduce a penalty already issued in periods before 1 June 1994, this will be reflected on a VAT666 produced with the tax assessment and on the VAT667 accompanying the VAT656.

No new or increased penalty will be calculated by the computer for periods before 1 June 1994.