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HMRC internal manual

VAT Default Interest Manual

The law and legal powers: Debt to the crown

A debt due to the crown is defined by The VAT Act 1994 Schedule 11. 5(1) as:

‘Recovery of VAT, etc

5 (1) VAT due from any person shall be recoverable as a debt due to the Crown.

(2) Where an invoice shows a supply of goods or services as taking place with VAT chargeable on it, there shall be recoverable from the person who issued the invoice an amount equal to that which is shown on the invoice as VAT or, if VAT is not separately shown, to so much of the total amount shown as payable as is to be taken as representing VAT on the supply.’

In the above circumstances the VAT Act 1994 S74(4) allows HMRC to charge interest as follows:

‘4) Where an unauthorised person, as defined in [paragraph 2(3) of schedule 41 to the Finance Act 2008] issues an invoice showing an amount as being VAT or as including an amount attributable to VAT, the amount which is shown as VAT or, as the case may be, is to be taken as representing VAT shall carry interest at [the rate applicable under section 197 of the Finance Act 1996] from the date of the invoice until payment.’