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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Insurance Premium Tax: Discretion, reasonable excuse and mitigation: Discretion

Please note: penalties under Schedule 7 Finance Act 1994 for failure to notify liability to register have been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008. The Failure to Notify penalty applies where an obligation to notify liability to register for IPT occurs on or after 01/04/2010. Penalties under Schedule 7 Finance Act 1994 will continue to apply where an obligation to notify occurs before 01/04/2010.

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

Please note: penalties under the Finance Act 1994 for failure to provide information and failure to produce records have now been replaced by penalties under Schedule 36 Finance Act 2008 where HMRC have requested information or documents on or after 01 /04/2010. If HMRC requested information or documents before 01/04/2010 the Finance Act 1994 penalties will continue to apply.

Please the Compliance Handbook CH20000 for more information about information and inspection powers.

Providing there are sound reasons for doing so HMRC can exercise discretion not to impose any penalty or interest assessment.

This is likely to be exceptional and case papers should record the reasons for the decision and endorsement by the line manager. Discretion is provided for by Schedule 7, paragraph 25 of the Finance Act 1994.

It is unlikely that you will wish to exercise your discretion to inhibit interest for the same reasons or as frequently as you would a penalty. A penalty is a compliance measure whereas interest is charged to obtain commercial restitution. If you are satisfied that the interest would not represent commercial restitution, you should use your discretion to inhibit the charge of interest.

When using your discretion

  • Maintain equality of treatment when applying a penalty.
  • Take full account of the circumstances of the particular case.
  • Don’t forget that the fundamental objective of civil penalties is to encourage trader compliance.