Recovery of VAT

 

VAT due from a taxable person is a debt due to the Crown (Value Added Tax Act 1994, Sch. 11, para. 5(1)). For the purpose of recovery proceedings, VAT includes:-

 

    • VAT shown as due by a return;

 

    • VAT, penalties, interest or surcharge included in any assessment issued by HMRC (VATA 1994, s. 76(9));

 

    • Penalties awarded by a tribunal in respect of any failure to comply with a direction or summons (VATA 1994, Sch. 12, para. 10(4)); or

 

    • VAT shown on any invoice issued by an unauthorised person (VATA 1994, Sch. 11, para. 5(3)).

 

 

 

 

The VAT charged in an assessment becomes due when no appeal is made against the assessment or when any appeal becomes final and conclusive. At that point HMRC may take any of the following steps to recover the VAT:-

 

    • Distraint proceedings, without the need for a court order (Value Added Tax Regulations 1995 (SI 1995/2518), reg. 212 and 213); VATA 1994, Sch. 11, para. 5(4) and (5));

 

    • Civil recovery proceedings in the High Court;

 

    • Darnishée proceedings, a Mareva injunction or attachment of earnings;

 

    • Bankruptcy proceedings; or

 

    • By way of set-off against moneys due to the person by HMRC (VATA 1994, s. 81(3)–(5); R v C & E Commrs, ex parte Richmond (1989) 4 BVC 100).

 

 

 

 

If the person has left the UK, but is within the member states, HMRC may apply to the authorities of the country where the person is to have the matter pursued through the courts of that country.

 

Where a director of a limited company has given a guarantee to satisfy HMRC’s demand for security, he may be held personally liable for any VAT due from the company and he may, in any event, be liable for a civil penalty for fraud, which is chargeable on the company, whether or not he has provided a personal guarantee.

 

Partners are jointly and severally liable for all partnership debts and, unless he notified HMRC that he had left the partnership, a retired partner can be held responsible for the payment of VAT in respect of a period after he retired from the firm (VATA 1994, s. 45(2) and (5)).

 

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