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HMRC internal manual

VAT Civil Penalties

Unauthorised issue penalty: Discretion, reasonable excuse and mitigation: Mitigation

Please note: the S 67 VATA 1994 penalty has been replaced by the VAT and Excise Wrongdoing penalty introduced by Schedule 41 Finance Act 2008. The VAT and Excise Wrongdoing penalty applies where a person makes an unauthorised issue of an invoice on or after 01/04/2010. If an unauthorised invoice has been issued before 01/04/2010 the S 67 penalty will continue to apply.

Please see the Compliance Handbook CH90000 Penalties for more information about the VAT and Excise Wrongdoing penalty.

If a trader has been unable to provide you with a reasonable excuse you should consider mitigation, this allows you to reduce the penalty depending on the circumstances. Each case should be considered on its own merits.

Section 70(1) of the VAT Act 1994 gives HMRC, and also on appeal the Tribunal, the power to mitigate penalties.

Where an individual is liable to a penalty for unauthorised issue of invoices, HMRC or on appeal, a Tribunal, may reduce the penalty to such an amount (including nil) as they think proper.

There are certain circumstances in Section 70(3) of the VAT Act 1994 for which mitigation cannot be allowed. These are

  • The insufficiency of the funds available to any person for paying any VAT due or for paying the amount of the penalty.
  • The fact that there has, in the case in question or in that case taken with other cases, been no or no significant loss of VAT.
  • The fact that the person liable to the penalty or a person acting on his behalf has acted in good faith.

To read more about

  • mitigation procedures, see VCP11254 
  • notifying a trader about mitigation, see VCP11255
  • the general factors to be taken into account when considering mitigation please see VCP11700 The Mitigation framework.