VDSOG1000 - Factors affecting default surcharge
Time to Pay (TTP)
Change of a legal entity/transfer of a going concern (TOGC)
Under-declarations and under-assessments
Over-declarations
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Taxpayers who go into company administration or enter into a voluntary arrangement (VA)
Time to pay (TTP)
Where a taxpayer contacts us to arrange TTP, they will not be in default and therefore not be liable to a surcharge as long as all of the following conditions are met:
- the taxpayer contacts HMRC on or before the due date for payment,
- a TTP arrangement is agreed (even if the agreement comes after the due date for payment),
- the agreement is not broken by the taxpayer, and
- any VAT returns covered by the arrangement are submitted by the due date.
For example:
| Return period | Due date for payment | Date of request for TTP | Date TTP agreement ends | Default? | Reason |
|---|---|---|---|---|---|
| 03/16 | 07/05/2016 | 12/05/2016 | 30/07/2015 | Yes | TTP requested after the due date |
| 09/16 | 07/11/2016 | 07/11/2016 | 31/12/2015 | No | TTP requested on the due date |
If returns are not received by the due date during a time to pay agreement and the taxpayer is already in the default surcharge system, they will receive a Surcharge Liability Notice Extension, that is, their surcharge liability period will be extended.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Change of legal entity/transfer of a going concern (TOGC)
Surcharge Liability Notices and surcharge assessments cannot be transferred from one taxpayer or one legal entity to another. The surcharge cycle must be restarted following a change of legal entity or transfer of a going concern.
For example:
A business is transferred from a sole proprietorship to a partnership on 1 February 2016. The business had previously incurred defaults in periods 10/15 and 01/16. A further default arises in 04/16. The record of defaults should read as follows:
| Period | Default |
|---|---|
| 10/15 | Surcharge Liability Notice only |
| 01/16 | Liability to surcharge at 2% |
| 04/16 | Surcharge Liability Notice only |
Under-declarations and under-assessments
Surcharges should not be recalculated if the VAT shown on a return is later found to under declare the actual amount due. However, the amount under-declared may be liable to a penalty under Sch 24 FA 2007, see CH80000.
If no return has been submitted and a central assessment has been issued any additional assessment will lead to the automatic recalculation of the surcharge.
Over-declarations
Default surcharges for periods are recalculated automatically to take account of over-declarations notified on Officer Assessments and Error Correction Notifications.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Taxpayers who go into company administration or enter into a voluntary arrangement (VA)
When either applies the surcharge cycle is also reset with the first period post going into company administration or VA not attracting any default, even if it is paid late.
For example, VA date is 08/05/2016
- pre relevant period is 06/16 - 01/04/2016 to 07/05/2016
- post relevant period is 09/16 - 08/05/2016 to 30/09/2016
Note: Neither of these periods are subject to a surcharge and the surcharge cycle is reset so the first default from the period 12/16 onwards would result in the issue of a Surcharge Liability Notice only, regardless of the pre company administration/VA surcharge level.