(1)In any case where, for a prescribed accounting period—
(a)a return is made which understates a person’s liability to VAT or overstates his entitlement to a VAT credit, or
(b)an assessment is made which understates a person’s liability to VAT and, at the end of the period of 30 days beginning on the date of the assessment, he has not taken all such steps as are reasonable to draw the understatement to the attention of the Commissioners,
and the circumstances are as set out in subsection (2) below, the person concerned shall be liable, subject to subsections (10) and (11) below, to a penalty equal to 15 per cent. of the VAT which would have been lost if the inaccuracy had not been discovered.
(2)The circumstances referred to in subsection (1) above are that the VAT for the period concerned which would have been lost if the inaccuracy had not been discovered equals or exceeds whichever is the lesser of £1,000,000 and 30 per cent. of the relevant amount for that period.
(3)Any reference in this section to the VAT for a prescribed accounting period which would have been lost if an inaccuracy had not been discovered is a reference to the amount of the understatement of liability or, as the case may be, overstatement of entitlement referred to, in relation to that period, in subsection (1) above.
(4)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 VAT for that period; and
(b)for the purposes of a case falling within subsection (1)(b) above, the true amount of VAT for that period.
(5)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 (8) 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.
(6)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 VAT 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 (9) below) as references to the amount of that aggregate.
(7)In this section “the true amount of VAT”, in relation to a prescribed accounting period, means the amount of VAT which was due from the person concerned for that period or, as the case may be, the amount of the VAT credit (if any) to which he was entitled for that period.
(8)Where—
(a)a return for any prescribed accounting period overstates or understates to any extent a person’s liability to VAT or his entitlement to a VAT credit, 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 this section that the statements made by each of those returns (so far as they are not inaccurate in any other respect) are correct statements for the accounting period to which it relates.
(9)This section shall have effect in relation to a body which is registered and to which section 33 applies as if—
(a)any reference to a VAT credit included a reference to a refund under that section, and
(b)any reference to credit for input tax included a reference to VAT chargeable on supplies, acquisitions or importations which were not for the purposes of any business carried on by the body.
F1(9A)This section shall have effect in relation to a body which is registered and to which section 33A applies as if—
(a)any reference to a VAT credit included a reference to a refund under that section, and
(b)any reference to credit for input tax included a reference to VAT chargeable on supplies, acquisitions or importations which were attributable to the provision by the body of free rights of admission to a museum or gallery that in relation to the body was a relevant museum or gallery for the purposes of section 33A.
(10)Conduct falling within subsection (1) above shall not give rise to liability to a penalty under this section if—
(a)the person concerned satisfies the Commissioners or, on appeal, a tribunal that there is a reasonable excuse for the conduct, 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 concerned.
(11)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,
that conduct shall not also give rise to liability to a penalty under this section.
Textual Amendments
F1S. 63(9A) inserted (11.5.2001 for specified purposes otherwise 1.9.2001) by 2001 c. 9, s. 98(3)(10)(11)