Penalties - VAT, excise and landfill tax wrongdoing - calculating, assessing and collecting the penalty

By Tolley
VAT_tax_img4

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Penalties - VAT, excise and landfill tax wrongdoing - calculating, assessing and collecting the penalty
  • Before calculating the penalty
  • Calculating the PLR
  • Reducing the penalty
  • Calculating the penalty
  • Processing the penalty
  • Appeals

This guidance note provides an overview of how HMRC will calculate the amount of penalty due if a person becomes liable to one because they have committed a wrongdoing. This note should be read in conjunction with the Overview of the three penalties introduced from 1 April 2010, Penalties - VAT, excise and landfill tax wrongdoing and Penalties - VAT, excise and landfill tax- types of wrongdoing guidance notes.

CH94000
Before calculating the penalty

Before HMRC can commence with calculating the amount of penalty that will be imposed on the business, it must take the following steps:

  • ascertain what it believes to be the underlying behaviour that caused the person to commit the wrongdoing
  • determine the applicable penalty period
  • calculate the amount of the potential lost revenue (PLR) that the penalty will be based upon
  • confirm whether it believes the disclosure of the wrongdoing was unprompted or prompted
  • determine the quality of disclosure made by the business
Calculating the PLR

HMRC will use the following as the basis for calculating the PLR:

CH94100; FA 2008, Sch 41, paras 6B and 6C
  • VAT or the amount representing VAT shown on the invoice issued by the unauthorised person
  • excise duty unpaid because of the wrongdoing

This amount tax or duty is the PLR for the purposes of calculating the amount of penalty due and the penalty will be calculated by applying an appropriate percentage to the PLR. Where the wrongdoing is the supply of a product knowing that it will be misused the maximum penalty percentage is 100% of the PLR. For all wrongdoing

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