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HMRC internal manual

VAT Default Surcharge Officer's Guide

HM Revenue & Customs
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Factors affecting default surcharge

Time to Pay (TTP)
Change of a legal entity/transfer of a going concern (TOGC)
Under-declarations and under-assessments
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Time to pay (TTP)

Where a taxpayer contacts us to arrange TTP, they will not be in default and therefore not be liable to a surcharge as long as all of the following conditions are met:

  • the taxpayer contacts HMRC on or before the due date for payment,
  • a TTP arrangement is agreed (even if the agreement comes after the due date for payment),
  • the agreement is not broken by the taxpayer, and
  • any VAT returns covered by the arrangement are submitted by the due date.

For example:

Return period Due date for payment Date of request for TTP Date TTP agreement ends Default? Reason
03/16 07/05/2016 12/05/2016 30/07/2015 Yes TTP requested after the due date
09/16 07/11/2016 07/11/2016 31/12/2015 No TTP requested on the due date

If returns are not received by the due date during a time to pay agreement and the taxpayer is already in the default surcharge system, they will receive a Surcharge Liability Notice Extension, that is, their surcharge liability period will be extended.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Change of legal entity/transfer of a going concern (TOGC)

Surcharge Liability Notices and surcharge assessments cannot be transferred from one taxpayer or one legal entity to another. The surcharge cycle must be restarted following a change of legal entity or transfer of a going concern.

For example:

A business is transferred from a sole proprietorship to a partnership on 1 February 2016. The business had previously incurred defaults in periods 10/15 and 01/16. A further default arises in 04/16. The record of defaults should read as follows:

Period Default
10/15 Surcharge Liability Notice only
01/16 Liability to surcharge at 2%
04/16 Surcharge Liability Notice only

Under-declarations and under-assessments

Surcharges should not be recalculated if the VAT shown on a return is later found to under declare the actual amount due. However, the amount under-declared may be liable to a penalty under Sch 24 FA 2007, see CH80000.

If no return has been submitted and a central assessment has been issued any additional assessment will lead to the automatic recalculation of the surcharge.


Default surcharges for periods are recalculated automatically to take account of over-declarations notified on Officer Assessments and Error Correction Notifications.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)