Penalties - breaches

By Tolley

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

  • Penalties - breaches
  • Breaches of regulatory provisions
  • Incorrect issue of a zero or reduced rate certificate
  • Breach of a ‘Walking Possession Order’
  • Breach of record-keeping requirements in respect of gold transactions
  • Breach of record-keeping requirements imposed by directions
  • Failure to comply with a direction or summons

This guidance note provides an overview of the penalties that could be imposed upon a person who breaches to comply with a requirement imposed under one of the following provisions.

Breaches of regulatory provisions

Please note that a person will not be liable to a penalty under these provisions if he is convicted of an offence or assessed for a penalty / surcharge under one of the following:

VCP11112; VATA 1994, ss 69, 76(2)(7)(8); FA 1996, s 35(6), Sch 3 para 9; FA 2000, s 136(3); De Voil Indirect Tax Service V5.352–354 (subscription sensitive)
  • VAT civil evasion penalty (see the VAT civil evasion penalty guidance note)
  • misdeclaration penalty (see the Misdeclaration penalty guidance note). Please note that this penalty has been replaced by the current penalty regime for inaccuracies and more information can be found in the Overview of the three penalties introduced from 1 April 2010 guidance note.
  • default surcharge (see the Default surcharge guidance note)

No penalty will also be imposed if the person has a reasonable excuse for the breach. HMRC may consider that a person has reasonable excuse on compassionate grounds, such as a member of the person’s family becomes very ill or passes away, the trader themselves becomes very ill or a member of staff whom they rely on to complete the VAT return becomes unexpectedly ill and this causes the breach. Ignorance of the law is not a reasonable excuse.

VATA 1994, s 69(8)

Please see VCP11142 for more information on what HMRC considers to be a reasonable excuse.

Failure to comply with a requirement to preserve records

If a person fails to comply with the requirement to preserve records under VATA 1994, Sch 11, para 6(3)

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