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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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New Means of Transport: Discretion, reasonable excuse and mitigation: Mitigation

Please note: the Section 67 VATA 1994 penalty has been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008. The Failure to Notify penalty applies to obligations to notify the acquisition of a new means of transport on or after 01/04/2010. The penalty under Section 67 VATA 1994 continues to apply where the obligation to notify the acquisition of a new means of transport occurs before 01/04/2010.

Please see the Compliance Handbook CH70000 for more information about the Failure to Notify penalty.

Section 70 of the VAT Act 1994 gives us the power to mitigate penalties.

Mitigation should only be considered if the circumstances put forward by the individual fall short of or fail to establish a reasonable excuse. Each case should be looked at on its own merits.

Section 70 sets out the circumstances for which mitigation can not be allowed

“(3) None of the matters specified in subsection (4) below shall be matters which the Commissioners or any tribunal shall be entitled to take into account in exercising their powers under this section.

(4) Those matters are -

(a) The insufficiency of the funds available to any person for paying any VAT due or for paying the amount of the penalty.

(b) The fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of VAT.

(c) The fact that the person liable to the penalty or a person acting on his behalf has acted in good faith.”

Please see VCP11700 The Mitigation Framework for general factors to be taken into account when considering mitigation.

The standard percentages for allowing mitigation for cooperation in disclosing and quantifying arrears in VCP11700 are not applied for the acquisition of a new means of transport. Instead, an allowance of 25% mitigation can be given if a person notifies HMRC voluntarily about the late notification of an acquisition. But this should not apply to notifications received by HMRC from the DVLA. Additionally, providing the information necessary to complete the VAT 413 should not qualify for mitigation in relation to quantification of arrears.