Skip to main content


Volume 229: debated on Tuesday 27 July 1993

The text on this page has been created from Hansard archive content, it may contain typographical errors.

To ask the Chancellor of the Exchequer, further to the oral statement by the Paymaster General in the Standing Committee on the Finance Bill on 8 June on the mitigation of VAT penalties, what are the other factors that must be taken into account for mitigation to be permissible on the basis of the excluded circumstances; how he will ensure that Customs exercise their discretion in mitigating the VAT penalty; whether guidelines will be published for the information of the taxpayer; and what measures he will take to ensure that the policy is being applied consistently between tax offices.

From Royal Assent to the Finance Bill, restrictions on customs' existing power of mitigation in cases involving dishonesty will be removed and the discretion to mitigate extended to misdeclaration penalties. The essence of such a discretion is that each case is examined on its merits and customs cannot be prescriptive. All the circumstances leading to a penalty will be considered. The only constraints are the three factors excluded by law, if they are the sole criteria. These constraints are necessary in order to maintain the integrity of the penalty regime.Customs will issue guidelines in public notices now being prepared. The use of the mitigation will be subject to customs' normal management controls. The mitigation is also subject to review by the independent VAT tribunal.

To ask the Chancellor of the Exchequer what changes are proposed to the payments on accounts scheme for VAT.

As announced at the time of the Budget in March, my right hon. and learned Friend the Chancellor now proposes that both the qualifying year for establishing inclusion in the scheme, and the reference year for establishing the level of payments, should be rolled forward to the most recent year for which details are available, 1992–93. This ensures that the scheme remains as fair as possible by using the most up-to-date information on the tax liability of businesses.A statutory instrument—the VAT (Payments on Accounts) Order 1993—will shortly be laid before the House to give effect to this and other changes from 2 September 1993. In the interest of equity, the order makes provision to bring new businesses and existing businesses immediately into the scheme, where such businesses have an annual VAT liability exceeding £2 million. It provides for increased payments where the VAT liability of a business increases to certain levels. It also allows a business to come out of the scheme where the latest year's liability is less than £1·6 million.