BIM31610 - VAT: penalties & repayment
supplement
HMRC can raise interest and penalty charges in connection with
VAT and pay VAT repayment supplements (similar to IT repayment
supplements). ICTA88/S827 provides that:
- the following payments are not deductible in computing any
income, profits or losses for tax purposes:
i) a penalty under any of Value Added Tax Act 1994(VATA94) S60 -
S70,
ii) interest payable under VATA94/S74,
iii) a surcharge under VATA94/S59.
- VAT repayment supplement under VATA94/S79 should be disregarded
for CT and IT purposes (but see below).
Interest payable by HMRC in respect of certain cases of official
error under VATA94/S78 is not within the ICTA88/S827 exemption and
is therefore not exempt from either IT or CT.
Details of the VAT penalties etc. which arise under
VATA94/S60 - S70 are given below.
VATA94/S72 provides for the criminal treatment of VAT
offences. Section 152 of the Customs & Excise Management Act
1979 allows HMRC to compound any proceedings for an offence. In
compounded cases a settlement is made on the basis of the arrears
of tax plus interest, plus a figure representing a penalty.
The VAT penalties etc., which can arise are:
- VATA94/S59 - the default surcharge
(penalties for repeated failures to make VAT returns or pay the tax
chargeable in certain circumstances).
- VATA94/S60 - evasion of VAT.
- VATA94/S61 - VAT evasion: liability of
directors, etc.
- VATA94/S62 - incorrect certificates as to
zero-rating etc.
- VATA94/S63 - misdeclaration or neglect
resulting in VAT loss for one accounting period equalling or
exceeding certain amounts.
- VATA94/S64 - repeated
misdeclarations.
- VATA94/S65 - inaccuracies in EC sales
statements.
- VATA94/S66 - penalties for failure to
submit EC sales statement.
- VATA94/S67 - failure to notify liability
to VAT or the issue of unauthorised VAT invoices.
- VATA94/S68 - breaches of walking
possession agreement (that is, an agreement not to sell or remove
property under distraint, but left in the possession of the
defaulter.
- VATA94/S69 - breaches of regulatory
provisions relating to VAT.
- VATA94/S72 - criminal offences: fraudulent
evasion of VAT, submission of false documents, dealing in goods of
which VAT is evaded, making supplies without providing
security.
- VATA94/S74 - interest of VAT recovered or
recoverable by assessment.
