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HMRC internal manual

VAT Traders’ Records Manual

Tax understated on self-billed documents: Legal position

(referred to in VATREC15040)

VAT Act 1994

Invoices provided by recipients of goods or services.

  1. Where—

  2. a taxable person (“the recipient”) provides a document to himself which purports to be an invoice in respect of a taxable supply of goods or services to him by another taxable person; and
  3. that document understates the VAT chargeable on the supply,

the Commissioners may, by notice served on the recipient and on the supplier, elect that the amount of VAT understated by the document shall be regarded for all purposes as VAT due from the recipient and not from the supplier.

The purpose of this legislation is to ensure that a self-billing trader accepts responsibility for the correct tax liability of the supplies to which his invoices relate. The issue of a Notice to both the customer and the supplier should ensure that only the customer would account for the VAT.

A copy of the required ‘Notice’ is at VATREC15080.