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HMRC internal manual

VAT Civil Penalties

Misdeclaration penalty: Reconsiderations and appeals: Appeals

Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after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

Review of MP

Any challenges to a misdeclaration penalty (MP), including requests for reasonable excuse or mitigation should be dealt with initially at the local office.

Cases should only be referred to Tax Administration, Litigation and Advice (TALA), see VCP10140, when further guidance is required.

Whether a trader has requested a review of the penalty or mitigation the procedure should be the same. All cases should be progressed as follows, you should

  • consider setting the LVO review code
  • confirm the tax assessment. Although the trader may only have requested a reconsideration/mitigation of the penalty, the first action should always be to confirm that the tax assessment is correct
  • consider whether there was a voluntary disclosure. Claims that an MP is not appropriate because the error was voluntarily disclosed should be considered
  • consider the relaxations
  • consider whether a reasonable excuse exists. The focus at this stage is the conduct which gave rise to the error
  • consider whether mitigation is appropriate. This should be considered last of all. At this stage it will be necessary to take a wider view of the penalty in all the circumstances
  • consider whether, in all the circumstances, it is reasonable to maintain the MP
  • advise the trader of the outcome.

If the trader requests a further review of the appeal and the trader

  • provides additional information, the case can be reviewed by the officer who undertook the first review
  • provides no additional information, you should tell the trader that the request is refused. Inform the trader of his rights to request a formal reconsideration and his rights of appeal and further consideration will be given if additional information is received.

Notification that a trader has formally appealed will normally come from the MP Appeals Section of the Solicitors Office. All appeal cases should be reviewed in accordance with any specific instructions from the Solicitors Office. The Appeals team reviewing officer must consider reasonable excuse, the degree of mitigation allowed and the exercise of discretion. Tax Administration, Litigation and Advice (TALA) will not be involved in the review process, but if you need help you should contact them.