VAT civil evasion penalty

Produced by Tolley

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

  • VAT civil evasion penalty
  • Introduction
  • When will a person be liable to a civil evasion penalty?
  • What does the term evading VAT mean?
  • What is dishonest conduct?
  • Who can be liable to the penalty?
  • How is the VAT civil evasion penalty calculated?
  • How is the amount of VAT evaded or sought to be evaded calculated?
  • How is the penalty assessed?
  • Time limits for raising an assessment
  • More...

VAT civil evasion penalty


This guidance note provides an overview of the VAT civil evasion penalty which could be imposed on a taxpayer.

It is important to note that current penalty legislation was introduced in FA 2007, Sch 24 and FA 2008, Sch 41, and one of these penalties will normally be levied by HMRC rather than the civil invasion penalty. The following penalties could be imposed by HMRC under the current rules:

  1. penalties for failure to notify (see the Penalties for failure to notify guidance note)

  2. penalties for inaccuracies (see the Penalties for inaccuracies in returns ― overview guidance note)

  3. penalties for VAT wrongdoing (see the Penalties ― VAT wrongdoing guidance note)

If the taxpayer has failed to submit a VAT return and the their intention was to evade VAT, and their conduct involves dishonesty, then the person may still be liable to a civil evasion penalty under VATA 1994, s 60.

A penalty for evading VAT was introduced in respect of cases where it can be proven that the sole proprietor, partnership’s or company’s conduct involves dishonesty.

The civil treatment of VAT evasion is an alternative to commencing with criminal proceedings but it is not intended to replace criminal proceedings if these are deemed to be more appropriate. Civil evasion penalties cannot be charged if the case has been criminally prosecuted or a compound penalty has been paid instead of criminal proceedings. However, late payment penalties and interest may still apply in these circumstances.

HMRC will only permit suitably trained officers to conduct civil investigations where they suspect that the taxpayer has evaded VAT.

See CEP8000 for a list of cases relating to the VAT civil evasion penalty that HMRC considers to be important that could be used in conjunction with this guidance note.

When will a person be liable to a civil evasion penalty?

The following criteria need to be satisfied before HMRC can levy a civil evasion penalty:

  1. a person has done a specified act or has

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