HMRC have introduced new penalties which it is calling wrongdoing penalties that are aimed at preventing the abuse of the VAT and Excise tax systems. The penalties will apply from 1 April 2010.
Broadly, the penalties will apply where a person issues invoices that include VAT which the person is not entitled to charge, handles goods on which Excise Duty has not been paid or deferred, uses a product in a way that means more Excise Duty should have been paid, or supplies a product at a lower rate of Excise Duty than should have been the case.
Penalties will be calculated as a percentage of the potential lost revenue, and the percentage used will depend on the gravity of the wrongdoing i.e. whether it was deliberate and concealed, deliberate but not concealed or not deliberate. The penalties can be up to 100% of the lost revenue.
Further detail regarding when the penalties will apply, what can affect them and how to avoid them are available here.