Inappropriate VAT

Unauthorised issue of an invoice showing VAT

The taxpayer registered for VAT in 2008 but the registration was cancelled on 12 March 2009. However it issued VAT invoices to a customer between 10 March 2011 and 31 July 2013.

The main reason for this was because one of its clients asked it to charge VAT on all future sales. The company director agreed to this request although he ringfenced the VAT element because he recognised that the company was not entitled to it and that it would have to be paid to HMRC or returned to the customer. But he failed to recognise that an invalid VAT charge is a debt to the Crown (VATA 1994 Sch 11 para 5) even though the company was not VAT-registered and the supplies were exempt.

On this basis in April 2014 HMRC assessed the VAT due and this...