Unauthorised VAT Invoices – What You Need to Know

Issuing an invoice with VAT on it might sound simple enough, but if you’re not registered for VAT or otherwise authorised, you could be setting yourself up for a penalty from HMRC. And the tricky part? Even if it’s done by mistake, you could still face consequences.

What Counts as an Unauthorised VAT Invoice?

An invoice doesn’t need to look official to cause a problem. If it shows VAT as a separate amount, or even just includes a figure that looks like VAT, HMRC could treat it as an unauthorised VAT invoice.

You’re considered unauthorised if you:

• Are not registered for VAT because your turnover is below the threshold.

• Have been deregistered from VAT but continue to issue invoices showing VAT.

• Start charging VAT before your registration is confirmed.

• Are a farmer who issues VAT flat rate invoices without being certified to use the Agricultural Flat Rate Scheme.

Why Does It Matter?

Let’s say you run a small garage and your turnover is below the VAT registration threshold. If you start issuing invoices that show VAT, you’re acting outside the rules, and HMRC can charge a penalty.

The same applies if you’ve deregistered but keep using old invoice templates, or if you jump the gun and begin charging VAT before your VAT number comes through.

Are There Any Exceptions?

If you can show that the mistake was a genuine error with a reasonable excuse, HMRC may waive the penalty. However, they take the unauthorised use of VAT very seriously, especially if it appears deliberate.

Farmers and the Flat Rate Scheme

Farmers using (or appearing to use) the Agricultural Flat Rate Scheme need to be particularly careful. If you’re not authorised or your invoices don’t meet the scheme’s requirements, HMRC will treat those invoices as unauthorised – and penalties could apply.

Key Takeaway

If you’re not VAT registered, don’t include VAT on your invoices. If you’re in doubt about whether you should be charging VAT, or if your business is close to the VAT threshold – it’s best to seek professional advice.

💡 Pandey & Co. Tip: Always double-check your VAT position before raising invoices. A simple oversight could result in HMRC penalties that are easily avoided with the right guidance.