§ I have one final reform of the VAT penalty system. Following Lord Keith's 1983 review, the Government concluded that it would be wrong to give Customs discretion over the level of VAT penalties. After considerable debate, this conclusion was eventually accepted by the House—I remember the strong debates very well—but the controversy has continued ever since, and, over time, more and more people have come to believe that it is wrong to have a penalty regime which is almost entirely automatic.
§ I have considered this matter all over again, and I have concluded that the time has come to make a change. I propose, therefore, that Customs should be given some discretion to mitigate the penalties for misdeclarations, to enable them to take account of the individual circumstances of the trader. If necessary, of course, the trader will still be able to appeal to a VAT tribunal, which will also have greater scope for discretion.
§ These reforms will put the VAT compliance system on to a secure long-term basis. They will be of most benefit to small businesses, for whom the burden of compliance is heaviest; and I know that they will be widely welcomed on both sides of the House.