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VAT and excise compliance checks

VAT and excise compliance checks HMRC NOTICES

HMRC publishes a range of factsheets that can be issued to taxpayers during a compliance check. There are various rules and powers which apply to HMRC compliance checks (formerly known as enquiries, visits and inspections) across almost all taxes administered by HMRC. These rules include the alignment of time limits for making tax assessments and claims.

The penalties for VAT and excise wrongdoings CC/FS12 factsheet concerns the penalties HMRC can charge you for a VAT or excise error known as a wrongdoing. The factsheet has recently been updated.

The VAT and excise wrongdoing penalties apply in situations where taxpayers:

  • Issues an invoice which includes ‘VAT’ that is not chargeable.
  • Handle goods on which excise duty has not been paid or deferred – for example bringing alcohol into the UK from abroad free of excise duty for personal consumption, but ultimately selling the alcohol in the UK.
  • Use a product in a way that means more excise duty should have been paid – for example the sale of red diesel to non-qualifying persons.

A wrongdoing penalty can be for up to 100% of lost tax revenue. The actual penalty levied is based on a sliding scale and depends on whether the taxpayer’s behaviour was non-deliberate, deliberate or deliberate and concealed. There are also further differences to the penalty if the disclosure was prompted or unprompted.

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