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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Breach of VAT Regulatory Provisions: Why a penalty arises: Penalties for a regulatory breach

In 1983 the independent Keith Committee on Enforcement Powers of Revenue Departments recognised poor trader compliance and considered that the then existing criminal sanctions were ineffective.

The review made recommendations which included a penalty system. The first phase of this system, which included penalties for breach of regulations, see VCP11130,was enacted in Section 17 of the Finance Act 1985.

The Keith Committee preferred the certainty and more general application of fixed rate, tax- geared penalties to the selectiveness of criminal proceedings as a means of securing compliance with the legal requirements of the tax.

It also recommended a tariff of daily rate penalties

  • that were not mitigable and increasing in severity in relation to the frequency of similar offences, and
  • provision for periodic up rating in line with inflation.

There are no implications under the Human Rights Act for a breach of regulatory provisions penalty, see VCP10160.