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HMRC internal manual

VAT Default Surcharge Officer's Guide

From
HM Revenue & Customs
Updated
, see all updates

Inhibiting defaults

There are occasions when surcharge defaults should be inhibited. The two categories of inhibit are:

  • National Inhibit - This may be set by the Tax Administration Advice team in Central Policy to inhibit surcharge processing for all traders, for example during a national emergency.
  • Taxpayer Specific Inhibit - Surcharge inhibits may be set in respect of individual taxpayers on an accounting period by accounting period basis. A taxpayer specific inhibit can be set by processing a VAT 719 through VALID.

When considering whether to set a taxpayer specific inhibit in an individual case, you should take account of the:

  • circumstances of the particular case,
  • need to treat all VAT registered taxpayers with fairness and impartiality, and
  • principal aim of the default surcharge system which is to improve compliance.

The following are examples of circumstances which may justify a taxpayer specific surcharge inhibit.

  • Taxpayer contacts HMRC before the due date for payment and time to pay is agreed, see VDSOG200.
  • Death of a sole proprietor.
  • Where a reasonable excuse for a late return/payment is established before a default is recorded.
  • Where a cash deposit is held as security.
  • Misapplied/missing remittance (for example, where a payment for a current return is received on time but is applied to the wrong registration).
  • Taxpayer is submitting monthly returns. (Once a Surcharge Liability Notice has been issued, a period specific inhibit must be set for the trader’s next tax period. This is to ensure that the taxpayer receives the notice and is able to put in place measures to avoid future defaults before becoming liable to surcharge.)
  • Duplicate registration.
  • Invalid entry in the register.