V5.357 Penalties in relation to import VAT

Part V5 Compliance, enforcement and appeals

V5.357 Penalties in relation to import VAT

V5.357 Penalties in relation to import VAT


A civil penalty regime was announced1 in the 2003 Budget and took effect from 27 November 2003. The regime makes provision for penalties in respect of the evasion of, and contravention of rules in relation to, a “relevant tax or duty”. This term includes import VAT, ie VAT chargeable by virtue of VATA s 1(1)(c)2.

The penalties are similar to those arising under the civil penalty regime for VAT. However, the penalty is “demanded” rather than assessed, and the appeals procedure follows that for customs and excise duty appeals, ie a review of the penalty must be undertaken by HMRC before an appeal to a tribunal may be made.

Penalties are not deductible for income tax or corporation tax purposes3.

Penalty for evasion of import VAT



    (1)     a person engages in any conduct for the purpose of evading import VAT, and


    (2)     his conduct involves dishonesty (whether or not such as to give rise to any criminal liability)

he is liable to a penalty equal to the amount of import VAT evaded.

For the meaning of “dishonest conduct”, see V5.341.

The term “evading” includes obtaining or securing, without being entitled to it5


    (a)     any repayment, rebate or drawback of import VAT;


    (b)     any relief or exemption from, or any allowance against, import VAT; or


    (c)     any deferral or other postponement of a person's liability to pay import VAT, or of the discharge by payment of any such liability.

It also includes the evasion of the cancellation of any

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