Value Added Tax Act 1994

64 Repeated misdeclarations

(1) In any case where—

(a) for a prescribed accounting period (including one beginning before the commencement of this section), a return has been made which understates a person’s liability to VAT or overstates his entitlement to a VAT credit; and

(b) the VAT for that period which would have been lost if the inaccuracy had not been discovered equals or exceeds whichever is the lesser of £500,000 and 10 per cent. of the gross amount of tax for that period,

the inaccuracy shall be regarded, subject to subsections (5) and (6) below, as material for the purposes of this section.

(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 (a “penalty liability notice”) specifying a penalty period for the purposes of this section;

(c) that notice is served before the end of 5 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 8 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 VAT for the prescribed accounting period in question which would have been lost if the inaccuracy had not been discovered.

(4) Subsections (3), (5), (8) and (9) of section 63 shall apply for the purposes of this section as they apply for the purposes of that section.

(5) An inaccuracy shall not be regarded as material for the purposes of this section if—

(a) the person concerned satisfies the Commissioners or, on appeal, a tribunal that there is a reasonable excuse for the inaccuracy; or

(b) at a time when he had no reason to believe that enquiries were being made by the Commissioners into his affairs, so far as they relate to VAT, the person concerned furnished to the Commissioners full information with respect to the inaccuracy.

(6) Where by reason of conduct falling within subsection (1) above—

(a) a person is convicted of an offence (whether under this Act or otherwise); or

(b) a person is assessed to a penalty under section 60 or 63,

the inaccuracy concerned shall not be regarded as material for the purposes of this section except, in the case of an inaccuracy by reason of which a person is assessed to a penalty under section 63, for the purposes of subsection (2)(a) above.

(7) In any case where subsection (5) or (6) above applies, any penalty liability notice the service of which depended upon the inaccuracy concerned shall be deemed not to have been served.