HMRC Reference:Notice 700/41 December 2010
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HMRC Reference:Notice 700/41 (December 2010)
Late registration penalty
of this notice
This notice covers the late registration penalty for VAT
obligations to notify a liability to be registered before 1 April 2010.
This penalty has been replaced by the new failure to notify
penalty for obligations to notify liability to be registered on or
after 1 April 2010. Please see fact sheet CC/FS 11 for details of the
new penalty. You can access the factsheet at New
Compliance checks - factsheets
2.What is this notice about?
This notice explains:
- when and how we may penalise you if you fail to register
for VAT at the right time, and
- your rights of appeal against the penalty.
Before you read this notice you should read Notice
700/1 Should I be registered for VAT? which will help you decide
whether you have to register.
This notice has been restructured to improve readability, but
the technical content has not changed from the April 1995 edition.
and notifying penalties
might I face a penalty?
We may penalise you if you fail to notify us at the correct
time that you should have registered for VAT.
The time limits for registration are explained in
Notice 700/1 Should I be registered for VAT?
The amount of the penalty will depend on the amount of VAT due
and how late you were in telling us that you should have registered.
much will the penalty be?
The penalty is worked out as a percentage of the VAT due
(output tax less input tax), from the date when you should have
registered to the date when we either received your notification, or
became fully aware that you were required to be registered. The rate of
penalty depends on how late you were in registering:
If you registered
Then the penalty rate will be
not more than 9 months late
more than 9 months but not more than - 18 months late
more than 18 months late.
There is a minimum penalty of £50.
will I be notified of the penalty?
We will notify you of the amount in writing. We will also
explain how to appeal against the penalty if you think you shouldn't be
penalised or the amount of penalty is wrong.
excuse and mitigation
is meant by reasonable excuse?
If we, or an independent tribunal, agree that there is a
reasonable excuse for the late registration, you will not be liable to
There is no legal definition of reasonable excuse but we will
look closely at the circumstances of each case and the conduct that led
to the late registration. If you can show that your conduct was that of
a conscientious business person who accepted the need to comply with
VAT requirements, then there may be a reasonable excuse.
The following guidelines show circumstances where there might
be a reasonable excuse for failing to register on time.
- Compassionate circumstances: where you
are totally responsible for running a small business and you or a
member of your immediate family was seriously ill or recovering from
such an illness at the time that notification was required.
- Transfer of a business as a going concern:
where you have taken over a business as a going concern with little or
no break in trading and you have sent returns and paid tax on time
under the registration of the previous owner.
- Doubt about liability of supplies:
where there is written evidence of an enquiry about the liability of
supplies and the liability has remained in doubt.
- Uncertainty about employment status:
where there are genuine doubts as to whether you are self employed, or
where you can produce correspondence with HM Revenue & Customs
about these doubts.
Your claim of reasonable excuse will not necessarily be
accepted just because it fits into one of these categories. Any
decision to accept reasonable excuse will be based on all the
circumstances of your individual case.
Genuine mistakes, honesty and acting in good faith are not
accepted as reasonable excuses for penalty purposes. And the law
provides specifically that you do not have a reasonable excuse if:
- you cannot afford to pay, or
- you relied on some other person to perform any task for
If the circumstances of your case fall short of reasonable
excuse, there may still be grounds to mitigate (reduce) the penalty
A penalty can be reduced if there are mitigating circumstances
that fall short of a reasonable excuse.
Like reasonable excuse, the law does not define the grounds
for mitigation but it specifically excludes:
- your lack of funds to pay any tax or penalty due
- the fact that little or no tax has been lost, and
- the fact that you acted in good faith.
When we consider mitigation we will consider all the facts
which led to the late registration. The amount of mitigation allowed
will depend on the circumstances of the case. We can mitigate the
penalty to nil but such cases are likely to be exceptional.
if I disagree with the penalty?
If you disagree with either your liability to penalty or the
amount of the penalty you have the statutory right to an independent
review. You should request a review within 30 days of the date of our
letter notifying you of the amount of the penalty.
- think that you have a reasonable excuse for failing to
register on time (see paragraph 3.1), or
- consider that you have been penalised at too high a
- think that there are mitigating circumstances which
warrant reduction of the penalty (see paragraph 3.2).
there anything else I can do?
You can appeal to an independent tribunal within 30 days of
the date of our letter notifying you of the amount of the penalty or,
if you have opted for a review, within 30 days of our letter telling
you of the conclusions of our review.
Information on reviews and appeals is available in our fact
sheet, HMRC 1, at www.hmrc.gov.uk or by phoning 0845 900 0404. You can
find out more about tribunals on the Tribunals Service website
or you can phone them on 0845 223 8080.
The tribunal can consider whether there is a reasonable excuse
and can also increase as well as decrease any amount of mitigation that
we have allowed.
About the Author
© Crown Copyright 2010.
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Article Published/Sorted/Amended on Scopulus 2011-01-19 09:06:52 in Tax Articles