No: C&E 10                             29 November 1994


                        BUDGET 1994 : VAT

             REDUCTIONS IN THE RATES OF VAT PENALTIES

In his Budget statement the Chancellor announced further
reforms to the VAT penalty regime. From 1 January 1995:

-        the maximum penalties for failure to register for
VAT, or to notify Customs of the importation of new means of
transport (generally vehicles) or goods liable to excise duty and pay
the VAT   on time, will be reduced from 30 to 15 per cent of the net
tax due.  The intermediate rate will be reduced from 20 to 10 per cent
and the   lower rate from 10 to 5 per cent; and

-         the penalty for unauthorised issue of tax
invoices will be reduced from 30 to 15 per cent of the amount charged as
tax.

The Chancellor's intention is to bring the rates for these
penalties into line with the other VAT penalties which were reviewed
and       deregulated in 1993.

NOTES FOR EDITORS

1.     A package of measures to improve VAT compliance was
introduced in the 1985 Finance Act following the recommendations of the
Keith   Committee. The measures were revised in 1988 and, following
a review and trade consultation, further reforms to most penalties
were     announced in the March 1993 Budget. The reforms were
designed to reduce the number and severity of penalties whilst at the
same time   maintaining trader compliance. The penalties being reformed
on this     occasion were not affected by the 1993 changes.

2.     Traders are liable to register for VAT when their
taxable turnover exceeds the VAT registration threshold. The penalty
for     belated notification of registration is calculated as a
percentage of the net tax due over the period of lateness and is
graduated  according to lateness. The minimum penalty is Pounds 50.

3.     The penalty for failure to notify the importation
from another European Community Member State ("acquisition") of a new
means of  transport (mostly vehicles but also boats and light
aircraft) or goods liable to excise duty within 7 days, and/or failure to
pay the      tax due within 30 days, was introduced as part of the
legislation  implementing the single market and came into effect on 1
January      1993. The penalties are graduated according to lateness,
with a minimum penalty of Pounds 50.

4.     The penalty for issuing an invoice charging tax when
not registered for VAT is 30 per cent of the amount charged as
tax, with a minimum of Pounds 50.

5.     There is no liability to any of these penalties if an
individual can satisfy Customs or a VAT and Duties Tribunal
that there is a reasonable excuse for their actions.

6.     The Commissioners and Tribunal have the power to take
mitigating circumstances into account when imposing or
reviewing any of these penalties.

7.     The reduction in receipts from penalties is estimated
to be negligible.  The changes will have no effect on the tax
revenue.

8.     A Compliance Cost Assessment (reference CCA 8) is
available, copies of which can be obtained from Jill Lewis, BACU3, 10th
floor W,   HM Customs & Excise, New King's Beam House, 22 Upper Ground,
London SE1 9PJ (Tel No: 0171-865-5570).

9.     Details for traders are available in Budget notice BN
107/94.




ISSUED BY:         HM CUSTOMS AND EXCISE,
                   PRESS AND INFORMATION OFFICE,
                   NEW KING'S BEAM HOUSE,
                   22 UPPER GROUND,
                   LONDON, SE1 9PJ

TELEPHONE:         0171 865 5468/5470/5471

FAX:               0171 865 5625