VAT and Excise penalties
HMRC have published new Guidance on VAT and Excise penalties setting out how the new system will operate.
From 1 April 2010 the new penalty regime will apply where taxpayers:
– Issue an unauthorised invoice showing or including VAT;
– Misuse a product so that a higher rate of excise duty is payable, or supply a product knowing that it will be used in such a way;
– Handles goods subject to unpaid excise duty.
Penalties will not normally be issued in limited scenarios where HMRC are satisfied that the taxpayer had a ‘reasonable excuse’.
Penalties for wrongdoings will range from 10% to 100% of the VAT or excise duty unaccounted for or of the VAT charged by non registered traders. In such cases the VAT will also be fully recovered.
Reason for wrongdoing | Disclosure | Minimum penalty | Maximum penalty |
Reasonable excuse | No penalty | No penalty | |
Careless | Unprompted | 10 per cent | 30 per cent |
Careless | Prompted | 20 per cent | 30 per cent |
Deliberate | Unprompted | 20 per cent | 70 per cent |
Deliberate | Prompted | 35 per cent | 70 per cent |
Deliberate & concealed | Unprompted | 30 per cent | 100 per cent |
Deliberate & concealed | Prompted | 50 per cent | 100 per cent |