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HMRC internal manual

Compliance Handbook

Penalties for VAT and Excise Wrongdoing: In what circumstances is a penalty payable: Unauthorised issue of an invoice showing or including VAT

If a person makes an unauthorised issue of an invoice showing or including VAT we can charge a penalty. The invoice simply needs to either show an amount of VAT or include an amount attributable to VAT. It does not otherwise have to qualify as a VAT invoice.

An unauthorised issue of an invoice showing or including VAT occurs where a person

  • who is an unauthorised person, see below
  • issues an invoice showing an amount

    • representing value added tax, or
    • including an amount attributable to value added tax.

An unauthorised person is anyone other than one of the following.

  • A person registered under VATA 1994.
  • A member of a VAT group of companies.
  • A representative person who is treated as a taxable person under VATA94/S46(4), for example an insolvency practitioner.
  • A person who sell goods on behalf of a taxable person in satisfaction of a debt and who is acting as the taxable person for the purposes of the sale, for example an auctioneer.
  • A person acting on behalf of the Crown.

In practice an unauthorised person will normally mean a person who has issued an invoice charging a sum as VAT:

  • while not registered for VAT because they are below the registration threshold;
  • after deregistration;
  • prior to the date on which they become liable to be registered; or
  • farmers not certified to use the flat rate scheme who issue a flat rate scheme invoice.

Traders who exceed the turnover threshold and thus become liable to registration should be considered for a Belated Notification Penalty.              


Mark is the sole proprietor of a garage. He is not registered for VAT because his turnover is below the registration threshold but he includes VAT on the invoices he issues to customers. Because Mark is not registered for VAT he is an unauthorised person. He makes an unauthorised issue of invoices when he issues invoices that include an amount purporting to be VAT. He is liable to a penalty.

A person will not be liable to a penalty if they have a reasonable excuse, see CH92000, for the non-deliberate unauthorised issue of the invoice.

Flat Rate Farmers

There are special provisions for flat rate farmers. They will be regarded as an unauthorised person if they issue an invoice which

  • does not comply with the requirements of the agricultural flat rate scheme, or
  • they are not authorised to issue under the agricultural flat rate scheme.

The farmer will be liable to a penalty.