No: CE 14                                            28 November 1995


			    BUDGET 1995 : VAT

	  AMENDMENT TO THE CIVIL PENALTY FOR FAILURE TO NOTIFY 
	      LIABILITY TO REGISTRATION AT THE PROPER TIME


The Chancellor announced that the penalty for failing to notify 
liability to register for VAT when a business has been transferred 
as a going concern, which had inadvertently been removed by previous 
legislation, will be restored from 1 January 1996. There will be no 
penalty if a business can demonstrate a reasonable excuse, and 
mitigating circumstances can be taken into account when fixing the 
amount of the penalty.


NOTES FOR EDITORS

1.     The penalty for failure to notify liability to register for 
VAT was originally introduced on 25 July 1985 as part of a package 
of compliance measures recommended by the Keith Committee, which 
looked at the enforcement powers of the revenue departments.

2.     The penalty was originally charged at a rate of 30 per cent 
of the net tax due over the period of lateness, but a graduated 
system allowing a lower and intermediate rate was introduced in 1988, 
and the rates of penalty were then halved in the 1995 Finance Act.

3.     The periods of lateness which trigger the graduations and the 
rates of penalty are now:

	*       not exceeding 9 months   5 per cent
	*       exceeding 9 months but  10 per cent
		not exceeding 18 months
	*       exceeding 18 months     15 per cent

There is no liability to a penalty, however, if a business can 
satisfy Customs or a VAT and Duties Tribunal that there is a 
reasonable excuse for their actions. Customs or the Tribunal can 
also take mitigating circumstances into account when setting the 
amount of any penalty.

4.     Changes were made in 1990 to the 1983 VAT Act with the 
intention of clarifying the position on the liability to register 
where a business is transferred as a going concern. These changes, 
however, inadvertently removed the provision for a penalty in a case 
of failure to notify liability to register for VAT where a business 
has been transferred as a going concern. 

5.     The estimated revenue yield from this measure is 5 million 
Pounds a year from 1996-97 onwards.

6.     A Compliance Summary (reference CS 3/95) is available, copies 
of which can be obtained from David Lonsdale, CDG, 8th floor C, 
HM Customs and Excise, New King's Beam House, 22 Upper Ground, 
London SE1 9PJ (Tel No: 0171-865-5570).

7.     Details for the trade are available in Budget notice BN 63/95.




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