Crown debts and demands for VAT

Produced by Tolley

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

  • Crown debts and demands for VAT
  • Crown debts
  • Unauthorised issue of a VAT invoice
  • Unauthorised person
  • Entitlement to recover input tax
  • Demands for VAT
  • Non-supplies
  • Self-billing

Crown debts and demands for VAT

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

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 adebt 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 aVAT 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 acrown debt. This applies whether or not VAT is actually due on the supply by aparty.

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

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

  1. a)

    the invoice is aVAT invoice issued in pursuance of paragraph 2(1) above; or

  2. 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

  3. c)

    the person issuing the invoice is ataxable person;

    and any sum recoverable from aperson under the sub-paragraph shall, if it is

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