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Please note: VAT Misdeclaration Penalty has been replaced by the Schedule 24 inaccuracy penalty for all accounting periods where the return period commences on or after 01/04/2008 and the due date is on or after 01/04/2009. Misdeclaration penalty will still apply where the due date is before 01/04/2009.

Please see the Compliance Handbook CH80000 Penalties for Inaccuracies for further details.

»Ê¹ÚÌåÓýapp Finance Act 1985 introduced two new penalties for errors made on VAT returns. »Ê¹ÚÌåÓýappse were known as “serious misdeclaration penaltyâ€� or “SMPâ€� and “persistent misdeclaration penaltyâ€� or “PMPâ€�

• SMP affected VAT periods starting on or after 1 April 1990
  and
• PMP affected VAT periods starting on or after 1 July 1988.

»Ê¹ÚÌåÓýappse two penalties proved to be insufficiently flexible to deal with the wide range of traders circumstances. This led to a major review in 1993 and after consultation with trade and professional bodies a revised misdeclaration penalty was introduced.

»Ê¹ÚÌåÓýapp new name of misdeclaration penalty underlines the extent of the reforms and re-emphasises that the penalty carries no implication of dishonesty.

»Ê¹ÚÌåÓýapp reformed procedures apply to all VAT periods starting on or after 1 June 1994.

Penalties issued before this date, continue to be tested against the old criteria but only reductions or withdrawals are notified to the trader by Form VAT 666. No new or increased penalties are issued for periods prior to 1 June 1994.

»Ê¹ÚÌåÓýapp purpose of misdeclaration penalty is to encourage traders to submit accurate returns on time.

»Ê¹ÚÌåÓýappre is a separate penalty for dishonesty and the penalty rate for that begins at 100%, compared with a rate of 15% for MP, see VCP10300 Civil Evasion.

»Ê¹ÚÌåÓýappre are no implications under the Human Rights Act for misdeclaration penalties, see VCP10160.