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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Debt and return pursuit: VAT: pre-enforcement action: issue of demand for payment

It is a legal requirement for a written demand to be issued to all customers who are in default before any enforcement action can be initiated. A demand, which does not have to be signed, is in itself often effective in producing payment. Automatic demands for VAT are issued from IDMS.

IDMS demands used in the VAT Campaigns are also available on SEES. In the case of a manual demand being required the appropriate letter should be issued. You should note IDMS with the letter issued and save a copy to the Electronic Folder.

Method of Payment

It is now mandatory to submit VAT returns online and pay any VAT due electronically. HMRC recommends payment by direct debit. Other electronic payment methods apart from direct debit include internet and telephone banking, Faster Payments and debit or credit card over the internet.

If, exceptionally the taxpayer is unable to pay electronically they can pay by post making the cheque payable to “HM Revenue and Customs only” - see the ‘How to pay VAT’ guidance (HMRC website).

Circumstances where issue of a demand may not be appropriate

Generally, there will be a review code on VISION that will take the case off of the automatic IDMS route and ensure the case is manually reviewed. The following are examples where the issue of a manual demand my be inappropriate.

  • The customer’s circumstances make distress undesirable (for example, human rights implications, serious illness, recent bereavement).
  • The customer is under investigation, or prosecution is being considered. You should only continue action if the investigating officer or team considering the case agrees.
  • The customer has an appeal pending at a Tribunal or the Department has ordered proceedings (civil or criminal), against the customer. Issue a demand only if the solicitor in charge of the case agrees.
  • An assessment is under reconsideration or appeal.
  • The customer is a registered charity.
  • The case is awaiting insolvency or civil recovery action.

Further information on review codes and inhibiting factors can be found in:

  • DMBM530560 on VAT indicators and review codes
  • DMBM950040 on actions to take for VAT signals and appeals.