Finance Act 1993

Section 49.

SCHEDULE 2 U.K. Value added tax: penalties etc.

Misdeclaration penalty under section 14 of the 1985 Act U.K.

1 (1) In subsection (2) of section 14 of the 1985 Act (penalty for misdeclaration or neglect imposed where the tax lost equals or exceeds certain amounts), for paragraphs (a) and (b) there shall be substituted “ equals or exceeds whichever is the lesser of £1,000,000 and 30 per cent. of the relevant amount for that period. ”

(2) After subsection (4) of that section there shall be inserted the following subsections—

“(4A) In this section “the relevant amount”, in relation to a prescribed accounting period, means—

(a) for the purposes of a case falling within subsection (1)(a) above, the gross amount of tax for that period; and

(b) for the purposes of a case falling within subsection (1)(b) above, the true amount of tax for that period.

(4B) In this section “the gross amount of tax”, in relation to a prescribed accounting period, means the aggregate of the following amounts, that is to say-

(a) the amount of credit for input tax which (subject to subsection (5A) below) should have been stated on the return for that period, and

(b) the amount of output tax which (subject to that subsection) should have been so stated.

(4C) In relation to any return which, in accordance with prescribed requirements, includes a single amount as the aggregate for the prescribed accounting period to which the return relates of—

(a) the amount representing credit for input tax, and

(b) any other amounts representing refunds or repayments of tax to which there is an entitlement,

references in this section to the amount of credit for input tax shall have effect (so far as they would not so have effect by virtue of subsection (5B) below) as references to the amount of that aggregate.”

(3) In subsection (5A) of that section (account to be taken of corrections), for “subsection (5) above that the statement made by each of those returns is a correct statement” there shall be substituted “ subsections (4B) and (5) above that the statements made by each of those returns (so far as they are not inaccurate in any other respect) are correct statements ”.

(4) This paragraph shall have effect in relation to any prescribed accounting period beginning on or after such day as the Treasury may by order made by statutory instrument appoint, but an order under this sub-paragraph may appoint different days for the purposes of different provisions of this paragraph or for different purposes.

Subordinate Legislation Made

P1 Sch. 2 para. 1(4) power fully exercised (10.11.1993): 1.12.1993 appointed day by S.I. 1993/2782, art. 2.

Misdeclaration penalty under section 14A of the 1985 Act U.K.

2 (1) In subsection (1)(b) of section 14A of the 1985 Act (misdeclaration resulting in understatements or overclaims), for the words from “whichever” to “period” there shall be substituted “ whichever is the lesser of £500,000 and 10 per cent. of the gross amount of tax for that period ”.

(2) For subsections (2) and (3) of that section (liability for penalty where there are misdeclarations on three or more occasions) there shall be substituted the following subsections—

“(2) Subsection (3) below applies in any case where—

(a) there is a material inaccuracy in respect of any prescribed accounting period;

(b) the Commissioners serve notice on the person concerned (in this section referred to as a “penalty liability notice”) specifying a penalty period for the purposes of this section;

(c) that notice is served before the end of five consecutive prescribed accounting periods beginning with the period in respect of which there was the material inaccuracy; and

(d) the period specified in the penalty liability notice as the penalty period is the period of eight consecutive prescribed accounting periods beginning with that in which the date of the notice falls.

(3) If, where a penalty liability notice has been served on any person, there is a material inaccuracy in respect of any of the prescribed accounting periods falling within the penalty period specified in the notice, that person shall be liable, except in relation to the first of those periods in respect of which there is a material inaccuracy, to a penalty equal to 15 per cent. of the tax for the prescribed accounting period in question which would have been lost if the inaccuracy had not been discovered.”

(3) In subsection (4) of that section, for “subsections (4) to (5B)” there shall be substituted “ subsections (4), (4B), (5A) and (5B) ”.

(4) In subsection (6) of that section (material inaccuracies not to be material in cases to which other sections apply), at the end there shall be inserted “ except, in the case of an inaccuracy by reason of which a person is assessed to a penalty under section 14 above, for the purposes of subsection (2)(a) above. ”

(5) Subject to sub-paragraph (6) below, this paragraph shall have effect in relation to any prescribed accounting period beginning on or after such day as the Treasury may by order made by statutory instrument appoint.

(6) No penalty liability notice shall be served on or after the day appointed under sub-paragraph (5) above by reference to any material inaccuracy in respect of a prescribed accounting period beginning before that day, and the penalty period specified in any penalty liability notice served before that day shall be deemed to end with the day before that day.

Subordinate Legislation Made

P2 Sch. 2 para. 2(5) power fully exercised (10.11.1993): 1.12.1993 appointed day by S.I. 1993/2782, art. 2.

Mitigation of penalties U.K.

3 (1) After section 15 of the 1985 Act there shall be inserted the following section—

“15A Mitigation of penalties under sections 13, 14, 14A and 15.

“15A (1) Where a person is liable to a penalty under any of sections 13, 14, 14A and 15 above, the Commissioners or, on appeal, a value added tax tribunal may reduce the penalty to such amount (including nil) as they think proper.

(2) In the case of a penalty reduced by the Commissioners under subsection (1) above, a value added tax tribunal, on an appeal relating to the penalty, may cancel the whole or any part of the reduction made by the Commissioners.

(3) None of the matters specified in subsection (4) below shall be matters which the Commissioners or any value added tax tribunal shall be entitled to take into account in exercising their powers under this section.

(4) Those matters are—

(a) the insufficiency of the funds available to any person for paying any tax due or for paying the amount of the penalty;

(b) the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of tax;

(c) the fact that the person liable to the penalty or a person acting on his behalf has acted in good faith.”

(2) Subsection (4) of section 13 of the 1985 Act (mitigation of penalty under section 13) shall cease to have effect; and—

(a) in subsection (1) of that section, for “subsections (4) and (7)” there shall be substituted “ subsection (7) ”;

(b) in paragraph (b) of subsection (5) of that section, for the words from “have power” to the end of that paragraph there shall be substituted “ have power under section 15A below to reduce a penalty under this section, ”; and

(c) in section 40(1A) of the M1 Value Added Tax Act 1983 (tribunal not to modify penalties under the 1985 Act), for “section 13(4)” there shall be substituted “ section 15A ”.

(3) This paragraph shall have effect in relation to any penalty under section 13, 14, 14A or 15 of the 1985 Act, other than one to which any person was assessed before the day on which this Act is passed.

Marginal Citations

M1 1983 c. 55.

Interest on tax etc. recovered or recoverable by assessment U.K.

4 (1) In subsections (1) and (3) of section 18 of the 1985 Act (interest on tax etc. recovered or recoverable by assessment), after the word “shall”, in each subsection, there shall be inserted “ (subject to subsection (3A) below) ”.

(2) After subsection (3) of that section there shall be inserted the following subsection—

“(3A) Where (apart from this subsection)—

(a) the period before the assessment in question for which any amount would carry interest under subsection (1) above; or

(b) the period for which any amount would carry interest under subsection (3) above,

would exceed three years, the part of that period for which that amount shall carry interest under that subsection shall be confined to the last three years of that period.”

(3) This paragraph shall apply in relation to interest on amounts assessed or, as the case may be, paid on or after such day as the Treasury may by order made by statutory instrument appoint.

Subordinate Legislation Made

P3 Sch. 2 para. 4(3) power fully exercised (8.9.1993): 1.10.1993 appointed day by S.I. 1993/2214, art. 2.

Default surcharge U.K.

5 (1) In section 19 of the 1985 Act, in subsection (2) (surcharge liability notice if default for two accounting periods)—

(a) in paragraph (a) for “any two prescribed accounting periods” there shall be substituted “ a prescribed accounting period ”,

(b) paragraph (b) shall be omitted, and

(c) in paragraph (c) for “later period referred to in paragraph (b)” there shall be substituted “ period referred to in paragraph (a) ”.

(2) In subsection (3) of that section for “defaults in respect of two prescribed accounting periods and the second of those periods” there shall be substituted “ a default in respect of a prescribed accounting period and that period ”.

(3) This paragraph shall apply in relation to any case where a person is in default for the purposes of section 19 of the 1985 Act and is so in default because of a failure of the Commissioners of Customs and Excise to receive a return, or an amount of tax, on or before a day falling on or after 1st October 1993; and in the case of sub-paragraph (2) above it is immaterial when the existing surcharge period began.

6 (1) For subsection (4) of section 19 of the 1985 Act (amount of surcharge) there shall be substituted the following subsection—

“(4) Subject to subsections (6) to (9) below, if a taxable person on whom a surcharge liability notice has been served—

(a) is in default in respect of a prescribed accounting period ending within the surcharge period specified in (or extended by) that notice, and

(b) has outstanding tax for that prescribed accounting period,

he shall be liable to a surcharge equal to whichever is the greater of the following, namely, the specified percentage of his outstanding tax for that prescribed accounting period and £30.”

(2) In subsection (5) of that section (specified percentages for default surcharge)—

(a) for “subsection (4)(a) above” there shall be substituted “ subsection (4) above ”, and

(b) after “surcharge period” there shall be inserted “ and for which he has outstanding tax ”.

(3) After subsection (5) of that section there shall be inserted the following subsection—

“(5A) For the purposes of subsections (4) and (5) above a person has outstanding tax for a prescribed accounting period if some or all of the tax for which he is liable in respect of that period has not been paid by the last day on which he is required (as mentioned in subsection (1) above) to make a return for that period; and the reference in subsection (4) above to a person’s outstanding tax for a prescribed accounting period is to so much of the tax for which he is so liable as has not been paid by that day.”

(4) This paragraph shall apply in relation to any case where a person—

(a) is in default for the purposes of section 19 of the 1985 Act in respect of a prescribed accounting period ending within a surcharge period, and

(b) is so in default because of a failure of the Commissioners of Customs and Excise to receive a return, or an amount of tax, on or before a day falling on or after 30th September 1993.

7 (1) In subsection (5) of section 19 of the 1985 Act (specified percentages for default surcharge)—

(a) at the end of paragraph (b) there shall be inserted “ and ”, and

(b) for paragraphs (c) and (d) there shall be substituted the following paragraph—

“(c) in relation to each such period after the second, the specified percentage is 15 per cent.”

(2) Sub-paragraph (1) above shall apply in relation to any liability to a surcharge arising on or after 1st April 1993.

(3) In section 19(5) of the 1985 Act (as amended by sub-paragraph (1) above), for paragraphs (a) to (c) there shall be substituted the following paragraphs—

“(a) in relation to the first such prescribed accounting period, the specified percentage is 2 per cent.;

(b) in relation to the second such period, the specified percentage is 5 per cent.;

(c) in relation to the third such period, the specified percentage is 10 per cent.;

(d) in relation to each such period after the third, the specified percentage is 15 per cent.”

(4) Sub-paragraph (3) above shall apply in relation to any liability to a surcharge arising on or after 1st October 1993.

Meaning of “the 1985 Act” U.K.

8 In this Schedule “the 1985 Act” means the M2 Finance Act 1985.

Marginal Citations

M2 1985 c. 54.