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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Incorrect certificates to zero-rating and lower rate supplies: Calculation and notification of a penalty: Who should be penalised

The objective of this penalty is to deter people from obtaining VAT relief to which they are not entitled.

It is the person who has issued the incorrect certificate who may be penalised under Section 62.

We will not ask suppliers to account for the VAT if the certificate is subsequently found to be incorrect, provided they have taken all reasonable steps to check the validity of the certificate, so that any supplies they have made have been zero-rated or a reduced rate of VAT has been charged in good faith, provided that the supply is covered by Extra Statutory Concession 3.11.

Extra Statutory Concession 3.11.

“Where a customer provides an incorrect declaration claiming eligibility for zero-rating under Groups 2,4,5,6,8,12 or 15 of the zero rate Schedule of the VAT Act 1994, or eligibility for a reduced rate under Group 1 of Schedule 7A for the qualifying use of fuel and power, and where a supplier, despite having taken all reasonable steps to check the validity of the declaration, nonetheless fails to identify the inaccuracy and in good faith makes the supplies concerned at the zero rate, or a reduced rate, Customs and Excise will not seek to recover the tax due from the supplier.”

Note: This Extra Statutory Concession does not cover all the certificates which can be penalised under Section 62. It does not cover supplies made for any reduced rate supply other than fuel and power, or supplies made under Group 1 of Schedule 9 VAT Act 1994 (zero rating for land) or supplies made where VAT relief can be obtained in relation to fiscal warehouse / warehouse supplies.

If an incorrect certificate is issued to cover supplies excluded from the Extra Statutory Concession, please contact Central Policy Tax Administration Advice (TAA) team, see VCP11321.