H.M. TREASURY Notes on Clauses

CLAUSE 15: VALUE ADDED TAX (EC SALES STATEMENTS: TIME LIMITS FOR ASSESSMENTS TO PENALTIES)

INTRODUCTION

1. This clause clarifies the 2 year time limit for assessing penalties relating to the submission of EC sales statements.

DETAILS OF THE CLAUSE

2. Subsection (1) provides for the substitution of new subsections (2) and (2A), for the existing subsection (2) of section 77 of the Value Added Tax Act 1994. The existing subsection (2) provides for a 2 year time limit for assessing any VAT penalty, interest or surcharge. The amendment removes from subsection (2) references to penalties, relating to EC sales statements, provided for in sections 65 and 66 of the Value Added Tax Act 1994. The 2 year time limit for section 65 and section 66 penalties is then expressly provided for in the new subsection (2A). The amendment provides that the 2 year time limit begins when Customs have sufficient facts to indicate to them that there is a liability to a penalty. New subsection (2A)(a) refers to inaccuracies in sales statements submitted. New subsection (2A)(b) refers to statements which have not been submitted on time. The effect is to clarify existing law.

3. Subsection (2) provides that the amendment will take effect from Royal Assent.

BACKGROUND

4. VAT registered businesses in the UK making supplies to VAT registered businesses in other EC Member States are required to provide Customs with details of these sales. These details are provided on EC sales statements. There are penalties for failing to submit these statements on time and for providing inaccurate statements.

5. The 2 year time limit for the making of a penalty assessment relating to EC sales statements is not expressed precisely in current law. However, the intention is that such a 2 year time limit should apply and, indeed, Customs' policy has always been to operate such a time limit.

6. This is a fairness and good housekeeping measure which clarifies the intention of the law and provides certainty for the business community that penalties will not be issued outside the intended time limit.