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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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Unauthorised issue penalty: Discretion, reasonable excuse and mitigation: Mitigation procedures

Please note: the S 67 VATA 1994 penalty has been replaced by the VAT and Excise Wrongdoing penalty introduced by Schedule 41 Finance Act 2008.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.

You must initially consider whether the information the trader gives you amounts to reasonable excuse. If it does not then you must consider mitigation, which may allow you to reduce the penalty depending on the circumstances.

Mitigation should be considered as soon as possible. If you know of mitigating factors that may be considered before a penalty is issued, that is when they should be considered.

Note: Remember the exclusions from mitigation, see VCP11252.

When deciding the amount by which a penalty is to be mitigated the following should be considered

  • If you accept that mitigation is justified then to reduce the penalty by less than 10% is likely to be seen as trivial and may lead to an appeal to the tribunal.
  • If after reducing the penalty, it is less than £50 you should consider whether it is worth maintaining the penalty at all, especially if mitigation amounts to more than 90% of the original amount.
  • You should aim to be consistent in each case but remember that each case will vary and must be treated on its own merits.