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HMRC internal manual

VAT Civil Penalties

Calculation and notification of a penalty: Material inaccuracies on EC Sales Lists

Material inaccuracies on AN EC Sales List (ESL) fall into three main categories which are defined in Section 65(2) VAT Act 1994. They are

  • Lines on the EC Sales list that ‘fail the gateway’. That means they are not acceptable to the VAT Information Exchange System (VIES) database because, for example, a VAT registration number entered on the ESL is invalid.
  • Lines on the EC Sales List that are factually incorrect, for example the value of a supply is stated to be £1000 when in fact it should be £1,000,000.
  • Data is missing on the EC Sales List.

Normally once a material inaccuracy or error has been found a form VAT104 (EC Sales List error report) is sent to the trader. This report highlights all the lines in error and asks the trader to supply the correct information so that the VIES database can be updated.

The ESL Compliance Unit can provide assistance for traders if required. If despite all efforts the unit are unable to correct the information and the trader does not meet the conditions to zero rate the supply of goods, as listed in VAT Notice 725 (4.3) an assessment can be raised.

If data is missing the trader will need to complete a form VAT101B to correct the error. Missing data can mean either

  • lines have been omitted from the EC Sales List , or
  • in the case of a VAT group who has been granted approval for the individual members to send in separate statements, a missing statement.

The latter is considered a material inaccuracy rather than a non submission because the missing EC Sales List is only one of those that form part of the ESL for the group.

Therefore if one of the group members fails to submit its part of the ESL, but other members of the group have submitted theirs, an ESL will have been submitted for the group but it will be incomplete and therefore inaccurate.

The ESL Compliance Unit will usually identify and attempt to correct those errors atbullet one above. Errors under bullet two and three are likely to be identified byassurance methods.

HMRC must in law, issue a warning letter within 6 months of a material inaccuracy being identified on an ESL. For guidance on issuing that warning letter, see VCP11042.