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HMRC internal manual

VAT Civil Penalties

Reconsiderations and appeals: Reduction and withdrawal of penalty assessments

A penalty assessment can be appealed to the VAT and Duties Tribunal on grounds of liability, calculation of the amount and reasonable excuse. The amount cannot be mitigated either by HMRC or the VAT and Duties Tribunal

You should make sure that the penalty period and amount of the penalty are correct in law before proceeding to tribunal. Errors may be questioned by the tribunal and may effect the outcome of the appeal.

To avoid enforcement action on the penalty before the appeal is heard, you should input Form VAT 672 to ‘ring fence’ the amount in dispute. This will suspend debt management action and prevent any repayment returns or other credits being offset against the penalty.

Registered traders

Where reduction or withdrawal of the penalty is necessary, complete form VAT 651 and arrange for input via VALID. Write to the trader telling them that a reduction or withdrawal has been arranged.

Non registered persons

In these circumstances write to the person telling them that a reduction or withdrawal has been approved, then if the person has

  • Not paid the penalty - notify the Birmingham Tax Accounting Centre and the Debt Management Unit if appropriate, that payment is not required and any proposed debt management action should be aborted.
  • Paid the penalty and a repayment is necessary - obtain details of the payment from the Birmingham Tax Accounting Centre. Send the details together with a copy of the reduction/withdrawal letter and a request for a manual repayment to Accounting and Adjustments(This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

Where any repayment becomes due as a result of a reduction or withdrawal, the repayment should be made as soon as possible.