HMRA4110 – Refusal/cancellation: Can you refuse or cancel registration on the grounds of debt to the crown?

We should not refuse or cancel a registration until it is clear that the trader is not going to pay, or that the debt poses a significant risk to the trader’s ability to continue or start a business in excise goods.

In some cases, arrangements may be in place to pay the debt back. For example, the trader may have a sizeable, unforeseen debt (perhaps because of a genuine mistake e.g. they zero rated VAT on a product or service which should be standard rated) and has entered into a time to pay arrangement to clear the debt.

In other cases, the debt may be contested by the trader and be the subject of a review/Tribunal. Before a Tribunal will hear a case, the trader will be required to either pay the debt, have adequate security in place to cover the debt, or be granted a certificate of hardship in place for the debt. During the review period, we do not normally enforce the debt. It may be difficult to defend a decision to refuse or cancel because of an irregularity/debt under review until the case has been heard. Ideally, you should have a number of other factors to support your decision.

Before any action is taken, it is important that you discuss the debt with the debt management team responsible for the trader. Where we register a trader with a debt on file it is important that we carefully monitor the business.