VCP11171 - Breach of VAT Regulatory Provisions: Calculation and notification of a penalty: Calculation and time Limits
The penalty must be assessed and notified to the trader within the legal time limit of 3 years after the event giving rise to the penalty (VAT Act Section 77 (1) (b)). If the event giving rise to the penalty is more than 3 years before the breach is discovered it will be out of time to assess.
If the breach of the regulatory requirement requires a warning letter the penalty assessment must be made within 2 years of the date of issue of the warning letter, VAT Act Section 76 (2).
The penalty is calculated from the date of the failure to comply with the regulatory requirement to the day before the failure is corrected, subject to a maximum of 100 days per failure.
Each failure to comply with a regulatory requirement, will give rise to a breach for the purposes of Section 69. There may be multiple breaches which would each attract a regulatory penalty. In these circumstances, at the discretion of the assessing officer, one penalty can be raised to take into account all the multiple breaches.
The date of the earliest breach would usually be taken to be the effective date the daily penalty begins to accrue. If the breach of the regulatory requirement is a continuing failure the effective date of the event giving rise to the penalty will be the date of the commencement of the failure.
Time limits
If there are breaches outside the 3 year period for assessment they are out of time to assess. The date of the earliest breach within the 3 year period should then be used as the effective date of the breach.
Similarly, if a penalty warning letter is required and the breach is earlier than 2 years before the penalty assessment can be made it will be out of time regardless of when the warning letter is issued.