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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: VAT: liability for payment: unregistered traders

Where a person who is neither registered for VAT nor required to be registered for VAT issues an invoice showing VAT due, we can demand that he pays to us an amount equivalent to the amount that he charged as VAT (paragraph 5 of schedule 11 to the VAT Act 1994).

We will allocate a non-VAT registration number to the debtor. VCU Data Preparation and Reconciliations Team maintain a record of payments made by unregistered traders. Always check with them first for any payments before taking recovery action. To bring payments to account see A4-1 Receipt, custody and disposal of money.

Amounts charged as VAT in the circumstances are not VAT but can be treated as debts due to the crown (paragraph 5 (3) of schedule 11 to the VAT Act 1994).

The person may be liable to a civil penalty under s.67 (1)(c) of the VAT Act 1994, or to a civil evasion penalty under s.60 of the Act. Civil penalties are recoverable as tax due and as debts due to the crown.

We do not assess tax due or any civil penalty using forms VAT 291 or VAT 641. Instead, we issue a single letter of assessment to the person. The date of the letter of assessment is the date that the debt due to the crown (being any amounts charged as VAT by the unregistered “person”) crystallises as a debt. Include a copy of this letter when referring the debt to the Enforcement and Insolvency Service (EIS) for civil recovery action

There is a right of appeal.