Following legal advice, HM Revenue & Customs (HMRC) has accepted that it cannot pursue a third party (eg. a solicitor, accountant or a mortgage company) for any VAT debt owed by a taxable person for whom the third party is acting in a transaction. This includes the situation where the taxable person has issued a VAT invoice and the monies, including the VAT element, have been paid to the third party, usually in a property transaction.
HMRC has recently acknowledged that the taxable person remains liable to pay the VAT due even if the third party still holds the VAT element of the monies. HMRC also now accepts that it would have no indirect cause of action against a third party to recover the VAT liability of the taxable person. HMRC has amended its Debt Management and Banking Manual to reflect its changed stance.
Solicitors, accountants and mortgage companies who hold monies on behalf of clients will welcome this statement by HMRC that they will not be pursued for their clients' unpaid VAT.
For more information, and to discuss how this decision may affect supplies by your business, please contact Vaughn Chown. Alternatively, please enter your details and submit the online form below.