Skip to content
Solved

CEP4100 | Civil evasion penalties for Customs, Excise and VAT: how civil evasion penalties are calculated: legislation

From HM Revenue & Customs · Civil evasion penalties for Customs, Excise and VAT

Customs

A penalty imposed under Section 25 of the Finance Act 2003 is equal to the amount of tax or duty evaded or sought to be evaded.

However, a penalty assessment can be reduced to any amount (including nil) at the Commissioners’ discretion, or on appeal at a tribunal’s discretion. The law governing mitigation of the civil evasion penalty is contained in Section 29 of the Finance Act 2003. Section 29(1) states:

Where a person is liable to a penalty under Section 25 or Section 26:

  • the Commissioners (whether originally or on review) or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper and

  • the Commissioners on a review, or on an appeal tribunal on an appeal, relating to a penalty reduced by the Commissioners under this subsection may cancel the whole or any part of the reduction previously made by the Commissioners.

Excise

A penalty imposed under Section 8 of Finance Act 1994 is equal to the amount of duty evaded or sought to be evaded.

However, a penalty assessment can be reduced to any amount (including nil) at the Commissioners’ discretion, or on appeal at a tribunal’s discretion. The law governing mitigation of the civil evasion penalty is contained in Section 8(4) and (5), stating:

(4) where a person is liable to a penalty under this section

  • the Commissioners or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper

  • neither of the following matters shall be a matter which the Commissioners or any appeal tribunal shall be entitled to take into account in exercising their powers under subsection (4) above, that is to say -

  • the insufficiency of the funds available to any person for paying any duty of excise or for paying the amount of the penalty;

  • the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of duty.

VAT

A penalty imposed under Section 60 of the VAT Act 1994 is equal to the amount of VAT evaded or sought to be evaded.

However, a penalty assessment can be reduced to any amount (including nil) at the Commissioners’ discretion, or on appeal at a tribunal’s discretion. The law governing mitigation of the civil evasion penalty is contained in Section 70 of the VAT Act 1994. Section 70(1) states:

  • Where a person is liable to a penalty under Section 60, 63, 64, 67 or 69A or under paragraph 10 of Schedule 11A, the Commissioners or, on appeal, a tribunal may reduce the penalty to such amount (including nil) as they think proper.