1985 c. 54.

1985 c. 54.

1985 c. 54.

1985 c. 54.

http://www.legislation.gov.uk/ukpga/1988/39/part/II/crossheading/civil-penalties/2016-09-15Finance Act 1988An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance.1988-07-29texttext/xmlenStatute Law Database2024-05-23Expert Participation2016-09-15Part II Value Added Tax Civil penalties
16 Serious misdeclaration or neglect resulting in understatements or overclaims.(1)

Section 14 of the Finance Act 1985 (serious misdeclaration or neglect resulting in understatements or overclaims) shall be amended as follows.

(2)

For subsections (2) and (3) there shall be substituted—(2)

The circumstances referred to in subsection (1) above are that the tax for the period concerned which would have been lost if the inaccuracy had not been discovered—

(a)

equals or exceeds 30 per cent. of the true amount of tax for that period, or

(b)

equals or exceeds whichever is the greater of £10,000 and 5 per cent. of the true amount of tax for that period.

(3)

In subsection (4) for the words “The references in subsections (1) to (3) above” there shall be substituted the words “Any reference in this section”.

(4)

In subsection (5) for the words “subsections (2)(a) and (3) above” there shall be substituted the words “this section”.

(5)

After that subsection there shall be inserted—(5A)

Where—

(a)

a return for any prescribed accounting period overstates or understates to any extent a person’s liability to tax or his entitlement to a payment under section 14(5) of the principal Act, and

(b)

that return is corrected, in such circumstances and in accordance with such conditions as may be prescribed, by a return for a later such period which understates or overstates, to the corresponding extent, that liability or entitlement,

it shall be assumed for the purposes of subsection (5) above that the statement made by each of those returns is a correct statement for the accounting period to which it relates.

(5B)

This section shall have effect in relation to a body which is registered and to which section 20 of the principal Act applies as if—

(a)

any reference to a payment under section 14(5) of that Act included a reference to a refund under the said section 20, and

(b)

any reference to credit for input tax included a reference to tax chargeable on supplies or importations which were not for the purposes of any business carried on by the body.

17 Persistent misdeclaration resulting in understatements or overclaims.

After section 14 of the Finance Act 1985 there shall be inserted—

14A Persistent misdeclaration resulting in understatements or overclaims.(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 tax or overstates his entitlement to a payment under section 14(5) of the principal Act; and

(b)

the tax for that period which would have been lost if the inaccuracy had not been discovered equals or exceeds whichever is the greater of £100 and 1 per cent. of the true 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 two prescribed accounting periods; and

(b)

the last day of the later one of those periods falls on or before the second anniversary of the last day of the earlier one; and

(c)

after the coming into operation of this section, the Commissioners serve notice on the person concerned (in this section referred to as “a penalty liability notice”) specifying as a penalty period for the purposes of this section a period beginning on the date of the notice and ending on the second anniversary of that date.

(3)

If there is a material inaccuracy in respect of a prescribed accounting period ending within the penalty period specified in a penalty liability notice served on the person concerned, that person shall be liable to a penalty equal to 15 per cent. of the tax for that period which would have been lost if the inaccuracy had not been discovered.

(4)

Subsections (4) to (5B) of section 14 above 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 value added tax 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 tax, 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 the principal Act or otherwise); or

(b)

a person is assessed to a penalty under section 13 or 14 above,

the inaccuracy concerned shall not be regarded as material for the purposes of this section.

(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.

18 Failures to notify and unauthorised issue of invoices.(1)

In subsection (1) of section 15 of the Finance Act 1985 (failures to notify and unauthorised issue of invoices)—

(a)

in paragraph (a), after the words “paragraphs 3, 4 and 11(2)” there shall be inserted the words “and (3)”;

(b)

in paragraph (b), for the words “an invoice” there shall be substituted the words “one or more invoices”; and

(c)

for the words “30 per cent.” there shall be substituted the words “the specified percentage”.

(2)

In subsection (3) of that section—

(a)

in paragraph (a), for the word “discovered” there shall be substituted the words “became fully aware of”;

(b)

in paragraph (b), after the words “sub-paragraph (2)” there shall be inserted the words “or (3)” and for the word “discovered” there shall be substituted the words “became fully aware of”; and

(c)

in paragraph (c), for the words “such an invoice as is” there shall be substituted the words “one or more such invoices as are” and for the words from “the amount” onwards there shall be substituted the words

the amount which is, or the aggregate of the amounts which are—

(i)

shown on the invoice or invoices as tax, or

(ii)

to be taken as representing tax.

(3)

After that subsection there shall be inserted—(3A)

For the purposes of subsection (1) above the specified percentage is—

(a)

10 per cent. where the relevant tax is given by paragraph (a) or (b) of subsection (3) above and the period referred to in that paragraph does not exceed nine months;

(b)

20 per cent. where that tax is so given and the period so referred to exceeds nine months but does not exceed eighteen months; and

(c)

30 per cent. in any other case.

(4)

In section 18 of that Act—

(a)

subsection (2) (which provides for tax to carry interest in certain cases of conduct falling within section 15(1)(a) of that Act) shall cease to have effect; and

(b)

in subsection (3), for the words “If, in a case where subsection (2) does not apply” there shall be substituted the words “In any case where”.

(5)

Where—

(a)

a person is liable to a penalty for conduct falling within paragraph (a) of subsection (1) of section 15 of that Act; and

(b)

any relevant tax by reference to which that penalty is to be assessed is payable for a period before 16th March 1988,

that subsection shall apply without the amendment made by subsection (1)(c) above in relation to so much of the assessment as is to be made by reference to that tax.

(6)

Subsections (1)(b) and (c), (2)(c) and (3) above shall be deemed to have come into force on 16th March 1988.

19 Breaches of regulatory provisions.(1)

In subsection (1) of section 17 of the Finance Act 1985 (breaches of regulatory provisions)—

(a)

after the words “paragraph 7” there shall be inserted the words “or 7A” and for the words “(notification of cessation of taxable supplies)” there shall be substituted the words “(notification of end of liability or entitlement to be registered etc.)”; and

(b)

for the words from “to a daily penalty” to the end there shall be substituted the words “to a penalty equal to the prescribed rate multiplied by the number of days on which the failure continues (up to a maximum of 100) or, if it is greater, to a penalty of £50.”

(2)

In subsection (3) of that section, for “£10”, “£20” and “£30” there shall be substituted “£5”, “£10” and “£15” respectively.

(3)

In subsection (1) of section 21 of that Act (assessment of amounts due by way of penalty, interest or surcharge), after the words “the Commissioners may” there shall be inserted the words “subject to subsection (1A) below” and after that subsection there shall be inserted—(1A)

Where a person is liable to a penalty under section 17 above for any failure to comply with such a requirement as is referred to in subsection (1)(b) to (e) of that section, no assessment shall be made under this section of the amount due from him by way of such penalty unless, within the period of two years preceding the assessment, the Commissioners have issued him with a written warning of the consequences of a continuing failure to comply with that requirement.

(4)

Where—

(a)

a person is liable to a penalty for any failure to comply with such a requirement as is referred to in subsection (1) of section 17 of that Act; and

(b)

any of the days by reference to which that penalty is to be assessed fall before 16th March 1988,

subsection (3) of that section shall apply without the amendments made by subsection (2) above in relation to so much of the assessment as is to be made by reference to those days.

(5)

Subsections (1)(b), (2) and (3) above shall be deemed to have come into force on 16th March 1988.

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<p>
Section 14 of the
<noteRef href="#c13526511" uk:name="commentary" ukl:Name="CommentaryRef" class="commentary"/>
Finance Act 1985 (serious misdeclaration or neglect resulting in understatements or overclaims) shall be amended as follows.
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For subsections (2) and (3) there shall be substituted—
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<intro>
<p>The circumstances referred to in subsection (1) above are that the tax for the period concerned which would have been lost if the inaccuracy had not been discovered—</p>
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<p>equals or exceeds 30 per cent. of the true amount of tax for that period, or</p>
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After that subsection there shall be inserted—
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<p>it shall be assumed for the purposes of subsection (5) above that the statement made by each of those returns is a correct statement for the accounting period to which it relates.</p>
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<heading> Persistent misdeclaration resulting in understatements or overclaims.</heading>
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After section 14 of the
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Finance Act 1985 there shall be inserted—
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<heading> Persistent misdeclaration resulting in understatements or overclaims.</heading>
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<intro>
<p>In any case where—</p>
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<num>(a)</num>
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<p>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 tax or overstates his entitlement to a payment under section 14(5) of the principal Act; and</p>
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<p>the tax for that period which would have been lost if the inaccuracy had not been discovered equals or exceeds whichever is the greater of £100 and 1 per cent. of the true amount of tax for that period,</p>
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<p>the inaccuracy shall be regarded, subject to subsections (5) and (6) below, as material for the purposes of this section.</p>
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<intro>
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<level class="para1">
<num>(a)</num>
<content>
<p>there is a material inaccuracy in respect of any two prescribed accounting periods; and</p>
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<p>
after the coming into operation of this section, the Commissioners serve notice on the person concerned (in this section referred to as “
<term refersTo="#term-a-penalty-liability-notice">a penalty liability notice</term>
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<num>(3)</num>
<content>
<p>If there is a material inaccuracy in respect of a prescribed accounting period ending within the penalty period specified in a penalty liability notice served on the person concerned, that person shall be liable to a penalty equal to 15 per cent. of the tax for that period which would have been lost if the inaccuracy had not been discovered.</p>
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<content>
<p>Subsections (4) to (5B) of section 14 above shall apply for the purposes of this section as they apply for the purposes of that section.</p>
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<p>An inaccuracy shall not be regarded as material for the purposes of this section if—</p>
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<num>(a)</num>
<content>
<p>the person concerned satisfies the Commissioners or, on appeal, a value added tax tribunal that there is a reasonable excuse for the inaccuracy; or</p>
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<num>(b)</num>
<content>
<p>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 tax, the person concerned furnished to the Commissioners full information with respect to the inaccuracy.</p>
</content>
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<subsection>
<num>(6)</num>
<intro>
<p>Where by reason of conduct falling within subsection (1) above—</p>
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<level class="para1">
<num>(a)</num>
<content>
<p>a person is convicted of an offence (whether under the principal Act or otherwise); or</p>
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<level class="para1">
<num>(b)</num>
<content>
<p>a person is assessed to a penalty under section 13 or 14 above,</p>
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<wrapUp>
<p>the inaccuracy concerned shall not be regarded as material for the purposes of this section.</p>
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<num>(7)</num>
<content>
<p>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.</p>
</content>
</subsection>
</section>
</quotedStructure>
</mod>
</p>
</content>
</section>
<section eId="section-18">
<num>18</num>
<heading> Failures to notify and unauthorised issue of invoices.</heading>
<subsection eId="section-18-1">
<num>(1)</num>
<intro>
<p>
In subsection (1) of section 15 of the
<noteRef href="#c13526531" uk:name="commentary" ukl:Name="CommentaryRef" class="commentary"/>
Finance Act 1985 (failures to notify and unauthorised issue of invoices)—
</p>
</intro>
<level class="para1" eId="section-18-1-a">
<num>(a)</num>
<content>
<p>in paragraph (a), after the words “paragraphs 3, 4 and 11(2)” there shall be inserted the words “and (3)”;</p>
</content>
</level>
<level class="para1" eId="section-18-1-b">
<num>(b)</num>
<content>
<p>in paragraph (b), for the words “an invoice” there shall be substituted the words “one or more invoices”; and</p>
</content>
</level>
<level class="para1" eId="section-18-1-c">
<num>(c)</num>
<content>
<p>for the words “30 per cent.” there shall be substituted the words “the specified percentage”.</p>
</content>
</level>
</subsection>
<subsection eId="section-18-2">
<num>(2)</num>
<intro>
<p>In subsection (3) of that section—</p>
</intro>
<level class="para1" eId="section-18-2-a">
<num>(a)</num>
<content>
<p>in paragraph (a), for the word “discovered” there shall be substituted the words “became fully aware of”;</p>
</content>
</level>
<level class="para1" eId="section-18-2-b">
<num>(b)</num>
<content>
<p>in paragraph (b), after the words “sub-paragraph (2)” there shall be inserted the words “or (3)” and for the word “discovered” there shall be substituted the words “became fully aware of”; and</p>
</content>
</level>
<level class="para1" eId="section-18-2-c">
<num>(c)</num>
<content>
<p>
<mod>
in paragraph (c), for the words “such an invoice as is” there shall be substituted the words “one or more such invoices as are” and for the words from “the amount” onwards there shall be substituted the words
<quotedStructure startQuote="" endQuote="" uk:context="unknown" uk:docName="unknown" ukl:TargetClass="unknown" ukl:TargetSubClass="unknown" ukl:Context="unknown" ukl:Format="default">
<p>the amount which is, or the aggregate of the amounts which are—</p>
<level class="para2">
<num>(i)</num>
<content>
<p>shown on the invoice or invoices as tax, or</p>
</content>
</level>
<level class="para2">
<num>(ii)</num>
<content>
<p>to be taken as representing tax.</p>
</content>
</level>
</quotedStructure>
</mod>
</p>
</content>
</level>
</subsection>
<subsection eId="section-18-3">
<num>(3)</num>
<content>
<p>
<mod>
After that subsection there shall be inserted—
<quotedStructure startQuote="" endQuote="" uk:context="body" uk:docName="ukpga" ukl:TargetClass="primary" ukl:TargetSubClass="unknown" ukl:Context="main" ukl:Format="default">
<subsection>
<num>(3A)</num>
<intro>
<p>For the purposes of subsection (1) above the specified percentage is—</p>
</intro>
<level class="para1">
<num>(a)</num>
<content>
<p>10 per cent. where the relevant tax is given by paragraph (a) or (b) of subsection (3) above and the period referred to in that paragraph does not exceed nine months;</p>
</content>
</level>
<level class="para1">
<num>(b)</num>
<content>
<p>20 per cent. where that tax is so given and the period so referred to exceeds nine months but does not exceed eighteen months; and</p>
</content>
</level>
<level class="para1">
<num>(c)</num>
<content>
<p>30 per cent. in any other case.</p>
</content>
</level>
</subsection>
</quotedStructure>
</mod>
</p>
</content>
</subsection>
<subsection eId="section-18-4">
<num>(4)</num>
<intro>
<p>In section 18 of that Act—</p>
</intro>
<level class="para1" eId="section-18-4-a">
<num>(a)</num>
<content>
<p>subsection (2) (which provides for tax to carry interest in certain cases of conduct falling within section 15(1)(a) of that Act) shall cease to have effect; and</p>
</content>
</level>
<level class="para1" eId="section-18-4-b">
<num>(b)</num>
<content>
<p>in subsection (3), for the words “If, in a case where subsection (2) does not apply” there shall be substituted the words “In any case where”.</p>
</content>
</level>
</subsection>
<subsection eId="section-18-5">
<num>(5)</num>
<intro>
<p>Where—</p>
</intro>
<level class="para1" eId="section-18-5-a">
<num>(a)</num>
<content>
<p>a person is liable to a penalty for conduct falling within paragraph (a) of subsection (1) of section 15 of that Act; and</p>
</content>
</level>
<level class="para1" eId="section-18-5-b">
<num>(b)</num>
<content>
<p>any relevant tax by reference to which that penalty is to be assessed is payable for a period before 16th March 1988,</p>
</content>
</level>
<wrapUp>
<p>that subsection shall apply without the amendment made by subsection (1)(c) above in relation to so much of the assessment as is to be made by reference to that tax.</p>
</wrapUp>
</subsection>
<subsection eId="section-18-6">
<num>(6)</num>
<content>
<p>Subsections (1)(b) and (c), (2)(c) and (3) above shall be deemed to have come into force on 16th March 1988.</p>
</content>
</subsection>
</section>
<section eId="section-19">
<num>19</num>
<heading> Breaches of regulatory provisions.</heading>
<subsection eId="section-19-1">
<num>(1)</num>
<intro>
<p>
In subsection (1) of section 17 of the
<noteRef href="#c13526541" uk:name="commentary" ukl:Name="CommentaryRef" class="commentary"/>
Finance Act 1985 (breaches of regulatory provisions)—
</p>
</intro>
<level class="para1" eId="section-19-1-a">
<num>(a)</num>
<content>
<p>
after the words “paragraph 7” there shall be inserted the words “or 7A” and for the words “(notification of cessation of taxable supplies)” there shall be substituted the words “(notification of end of liability or entitlement to be registered
<abbr title="et cetera" xml:lang="la">etc.</abbr>
)”; and
</p>
</content>
</level>
<level class="para1" eId="section-19-1-b">
<num>(b)</num>
<content>
<p>for the words from “to a daily penalty” to the end there shall be substituted the words “to a penalty equal to the prescribed rate multiplied by the number of days on which the failure continues (up to a maximum of 100) or, if it is greater, to a penalty of £50.”</p>
</content>
</level>
</subsection>
<subsection eId="section-19-2">
<num>(2)</num>
<content>
<p>In subsection (3) of that section, for “£10”, “£20” and “£30” there shall be substituted “£5”, “£10” and “£15” respectively.</p>
</content>
</subsection>
<subsection eId="section-19-3">
<num>(3)</num>
<content>
<p>
<mod>
In subsection (1) of section 21 of that Act (assessment of amounts due by way of penalty, interest or surcharge), after the words “the Commissioners may” there shall be inserted the words “subject to subsection (1A) below” and after that subsection there shall be inserted—
<quotedStructure startQuote="" endQuote="" uk:context="body" uk:docName="ukpga" ukl:TargetClass="primary" ukl:TargetSubClass="unknown" ukl:Context="main" ukl:Format="default">
<subsection>
<num>(1A)</num>
<content>
<p>Where a person is liable to a penalty under section 17 above for any failure to comply with such a requirement as is referred to in subsection (1)(b) to (e) of that section, no assessment shall be made under this section of the amount due from him by way of such penalty unless, within the period of two years preceding the assessment, the Commissioners have issued him with a written warning of the consequences of a continuing failure to comply with that requirement.</p>
</content>
</subsection>
</quotedStructure>
</mod>
</p>
</content>
</subsection>
<subsection eId="section-19-4">
<num>(4)</num>
<intro>
<p>Where—</p>
</intro>
<level class="para1" eId="section-19-4-a">
<num>(a)</num>
<content>
<p>a person is liable to a penalty for any failure to comply with such a requirement as is referred to in subsection (1) of section 17 of that Act; and</p>
</content>
</level>
<level class="para1" eId="section-19-4-b">
<num>(b)</num>
<content>
<p>any of the days by reference to which that penalty is to be assessed fall before 16th March 1988,</p>
</content>
</level>
<wrapUp>
<p>subsection (3) of that section shall apply without the amendments made by subsection (2) above in relation to so much of the assessment as is to be made by reference to those days.</p>
</wrapUp>
</subsection>
<subsection eId="section-19-5">
<num>(5)</num>
<content>
<p>Subsections (1)(b), (2) and (3) above shall be deemed to have come into force on 16th March 1988.</p>
</content>
</subsection>
</section>
</hcontainer>
</part>
</body>
</act>
</akomaNtoso>