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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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Misdeclaration penalty: Calculation and notification of a misdeclaration penalty: Time limits for assessing 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Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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.

Misdeclaration Penalty

The law relating to time limits for misdeclaration penalties (MP) is held in Section 77 of the VAT Act 1994.

An assessment for a misdeclaration penalty (MP) may be made at any time

  • within 2 years of the date the VAT due for the prescribed accounting period is finally determined, or
  • within the three years after the end of the prescribed accounting period or importation or acquisition

whichever is the later.

It is considered good practice to issue the penalty as soon as possible to avoid any unnecessary delay.

The tax in a period is finally determined on the later of

  • the date of receipt of a return
  • the date of issue of the VAT 655 (notification of an officer’s assessment)
  • the date of any amendment to that officer’s assessment
  • the date of issue of a VAT 657 (notification of voluntary disclosure)
  • the date of any section 85 agreement
  • the date an appeal is withdrawn, or
  • the date of release of a Tribunal decision or a judgement of the court being delivered, this includes cases where the amount of the tax assessment is upheld as originally issued.

Note: A penalty assessment for MP or a repeated misdeclaration penalty MP(R) should not be made more than 3 years after a person’s death.

Repeated Misdeclaration Penalty

An assessment for repeated misdeclaration penalty MP(R) should not be made more than 3 years after the receipt of the return which triggers the MP(R)

Note: A penalty assessment for MP or a repeated misdeclaration penalty MP(R) should not be made more than 3 years after a person’s death.