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HMRC internal manual

VAT Civil Penalties

Discretion, reasonable excuse and mitigation: Discretion

Discretion is provided for in VAT Act 1994 Section 76.

Providing there are sound reasons for doing so, HMRC can exercise their discretion not to impose a penalty. However this is likely to be exceptional and case papers should record the reasons for the decision and endorsement by the line manager.

In exercising discretion you should

  • Maintain equality of treatment when applying a penalty.
  • Consider all the circumstances of each individual case.
  • Always remember that the objective of civil penalties is to encourage trader compliance.