Crown debts and demands for VAT

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Crown debts and demands for VAT
  • Crown debts
  • Entitlement to recover input tax
  • Demands for VAT

This guidance note provides an overview of methods used by HMRC to collect VAT due. HMRC cannot issue an assessment to collect the VAT due on these types of errors or omissions.

Crown debts

This section provides details of the types of situations where HMRC will treat a debt as a 'crown debt' and the steps they will take to collect the VAT due. It is important to note that unlike VATA 1994, s 73, which prescribes time limits for the making of assessments, demands for amounts where an assessment is not appropriate are not restricted by any time limit constraints. Please see the Assessments guidance note for more information.

Unauthorised issue of a VAT invoice

If an amount is charged as VAT on an invoice and it is not declared to HMRC, HMRC has the power to collect the VAT amount from the person issuing the invoice as a crown debt. This applies whether or not VAT is actually due on the supply by a party.

VATA 1994, Sch 11 para 5; VAEC9570

VATA 1994, Sch 11, para 5(3) states:

5(3) Sub-paragraph (2) above applies whether or not -

  • a)the invoice is a VAT invoice issued in pursuance of paragraph 2(1) above; or
  • b)the supply shown on the invoice actually takes or has taken place, or the amount shown as VAT, or any amount of VAT, is or was chargeable on the supply; or
  • c)the person issuing the invoice is a taxable person;

    and any sum recoverable from a person under the sub-paragraph shall, if it is in any case VAT be recoverable as such and shall otherwise be recoverable as a debt due to the Crown

Businesses therefore need to be

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