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HMRC internal manual

VAT Civil Penalties

From
HM Revenue & Customs
Updated
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New Means of Transport: Calculation and notification of the penalty: Calculation of a penalty

Please note: the Section 67 VATA 1994 penalty has been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008.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.

The 4 basic stepsare

  • Establish liability. Where reasonable excuse exists there is no liability to a penalty.
  • Quantify the liability.
  • Raise a penalty assessment. We have discretion whether or not to assess any penalty, interest or surcharge. In exercising discretion, we must

    • Maintain equity in the application of civil penalties.
    • Take full account of the circumstances of the particular case.
  • Notify a penalty assessment.

The objective of civil penalties is to encourage trader compliance.

Level of penalty

For failure to notify/late notification

  • notification up to 3 months late - 5% of tax due
  • notification exceeding 3 months but not exceeding 6 months late - 10% of tax due
  • notification exceeding 6 months late - 15% of tax due.

For failure to pay

  • payment up to 3 months late - 5% of tax due
  • payment exceeding 3 months but not exceeding 6 months late - 10% of tax due
  • payment exceeding 6 months late - 15% of tax due.

A person can incur two penalties

  • the first for late notification
  • the second for late payment.

Note: A penalty of £50 applies where the penalty is calculated at less than £50 or where there is no relevant VAT.