Control

If you fail to make a return when it is due or make an incomplete or incorrect return, we have powers to assess, to the best of our judgement, the amount of VAT you owe.

We do not make assessments more than 3 years after the end of the relevant tax period unless there are special circumstances, such as fraud. In these special cases the period of assessment is limited to 20 years. If we issue an assessment which we or a VAT and Duties Tribunal later find to be too low, the amount of the assessment can be increased.

If you repeatedly pay assessments instead of sending in VAT returns, then we will increase the amount for which you are assessed with each assessment.

We also have powers to assess for recovery of any refunds of VAT and statutory interest which were wrongly paid or credited to you. 21.2.2 Default surcharge

A default occurs if the VAT Central Unit do not receive a VAT return and all the VAT due for the period it covers by the due date shown on the return.

(a) Surcharge Liability Notices

Each time you default, we will send you a Surcharge Liability Notice or a Surcharge Liability Notice Extension.

These notices will warn you that

If… Then…

you default in respect of a prescribed accounting period ending within a specified period (the surcharge period)

you may be liable to a default surcharge.

The surcharge period begins on the date of the notice and ends 12 months from the end of the latest period in default.

If you default for the first time in any 12 month period we will send you a Surcharge Liability Notice.

This Notice will warn you that

If… Then…

you default during the

surcharge period specified on the Notice and you owe VAT for the period in default

you may be liable to a surcharge. In addition, we will send you a Surcharge Liability Notice Extension which will extend the surcharge period.

(b) Calculation of surcharge

The surcharge is calculated as a percentage of the VAT that is unpaid for the accounting period covered by the return.

If you do not send in your return, we will assess the amount of VAT you owe and the surcharge will be calculated as a percentage of this amount. If you send in your VAT return after an assessment has been issued, the amount of the surcharge will be adjusted to reflect the VAT shown as due on the return (whether or not you send payment for the VAT due with your return).

For the first payment default during a surcharge period you may be liable to a surcharge of 2% of the tax outstanding at the due date. The rate of surcharge will then increase progressively to 5%, 10% and 15% within the surcharge period.

There are specific procedures in cases where a surcharge assessment is less than £400 (Before January 2002 these procedures applied to surcharges less than £200):

If the surcharge is calculated at…

Then we will…

2% or 5% not issue a surcharge assessment. In these circumstances we will:

• record a default;

• issue a Surcharge Liability Notice extending the surcharge period; and

• increase the rate of surcharge if you default again within the surcharge period.

10% or 15% issue a surcharge assessment for either £30 or the actual amount calculated, whichever is the greater.

(c) Other important information There is no liability to surcharge if you:

• send in a nil or repayment return; or

• pay the VAT due on time but send in your return late. We will record a default and issue a Surcharge Liability Notice extending the surcharge period, but the rate of surcharge will not increase.

Please remember:

• Do not send post-dated cheques. These are not initially recognised as such and are immediately presented to the banking system.

• If you have an agreement with your VAT office to defer payment, you may still be liable to a surcharge.

• If you pay by credit transfer you must allow enough time for the payment to reach us by the due date. You should get in touch with your bank well in advance of the due date if you have any doubt about how long the transfer will take. You can ask us to reconsider your liability to a surcharge. You can also appeal - subject to certain conditions - to a VAT and Duties Tribunal against any or all of the defaults which led to you becoming liable to a surcharge.

You can find further information in Notice 700/50 Default Surcharge. 21.2.3 Approval to use estimated figures on VAT returns If you know that you will be unable to make an accurate return, you should contact the VAT Business Centre for your area as soon as possible. If they consider that you have a good reason, you may, exceptionally, be allowed to estimate your input tax and/or output tax. If you are allowed to use estimated figures and your return and VAT reach the VCU by the due date, you will not be in default. If you ask for approval to use estimated figures once the due date is passed, we will consider your request but it will not affect any default which has already been recorded.

You must establish the correct amount of VAT. Any resulting

adjustment must be included on the VAT return for the next period. If we agree that this is not possible, you may include any revisions in the following period at the latest.

21.2.4 Failure to pay

Notice 930 What if I don’t pay? outlines the action we may take to recover outstanding debts. If you think you may not be able to pay your VAT on time, you should make urgent contact with your bank, your financial adviser and the Debt Management Unit for your area. 21.2.5 Distress

We have powers to recover money owed to us if you neglect or refuse to pay it, including the power to distrain on (or, in Scotland, to poind) your assets.

21.3 Methods of payment