§ Mr. French
To ask the Chancellor of the Exchequer what formula is adopted when deciding the penalty for late payment of VAT returns.
§ Sir John Cope
Under the Finance Act 1985 liability to default surcharge arises where a taxpayer persistently fails to render a return or pay any VAT due on time. After two defaults have occurred within twelve months, a third default within 12 months of the second results in a liability to a surcharge of 5 per cent. of the unpaid tax. The level770W of surcharge increases for subsequent defaults, but cannot exceed 20 per cent. for defaults incurred after 1 April 1992. The maximum surcharge was previously 30 per cent.