A new regime for VAT and Excise penalties commenced on 1 April 2010. It provides that the penalties levied for underpayments of VAT and Excise Duty will depend on both the reason for the wrongdoing and whether the disclosure was unprompted or prompted.
Where there is a ‘reasonable excuse’, no penalty will be levied. Needless to say, the criteria which allow such a claim to be made are strict and are likely to include only events which are ‘exceptional and beyond the individual’s control’.
In other cases, the penalties (in terms of the percentage of tax underpaid – these must be paid in addition to the tax due) sought will be as below.
| Reason for Wrongdoing | Disclosure | Minimum Penalty | Maximum Penalty |
| Careless | Unprompted | 10% | 30% |
| Careless | Prompted | 20% | 30% |
| Deliberate | Unprompted | 20% | 70% |
| Deliberate | Prompted | 35% | 70% |
| Deliberate and Concealed | Unprompted | 30% | 100% |
| Deliberate and Concealed | Prompted | 50% | 100% |
