Penalties for inaccuracies - assessing the penalty

By Tolley

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

  • Penalties for inaccuracies - assessing the penalty
  • Assessing the penalty
  • Paying the penalty
  • Suspending a penalty

This guidance note provides an overview of how HMRC assesses and collects an inaccuracy penalty that has been levied on a business. This note should be read in conjunction with the Overview of the three penalties introduced from 1 April 2010, Penalties for inaccuracies - overview, Penalties for inaccuracies - calculating the penalty and Penalties for inaccuracy - agents and officers guidance notes.

Assessing the penalty

When HMRC has established that a business is liable to a penalty for an inaccuracy or under-assessment, it usually assesses the penalty. The penalty assessment is enforceable by HMRC in the same way as an assessment to tax. This means the rules that apply to the tax or duty, to which the penalty relates to, will also apply to the actual penalty assessment as well.

CH83000; FA 2007, Sch 24, para 13(2) and (7); King v United Kingdom (App No 13881/02) (ECHR); De Voils Indirect Tax Service V5.345 (subscription sensitive)

HMRC will need to determine the following before it will be in a position to issue the penalty:

  • the amount of the penalty or penalties that are due
  • the tax period to which the penalty or penalties relates

HMRC must ensure that it complies with the decision in King v UK. As a result of this decision, HMRC is required to try to ensure that it issues any penalty assessments at the same time

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