Last updated: 14 October 2026
What should you do if a customer refuses to pay the VAT on your invoice?
First, check your contract or quote. If you agreed a price “plus VAT”, the customer owes the VAT as part of the debt, and you can chase it like any other unpaid amount. If the price was silent about VAT, it is normally treated as including VAT. You would then have to account for VAT out of the amount the customer agreed to pay. Either way, the VAT on the invoice is due to HMRC whether or not the customer pays.
Why your quote matters
| What your quote said | What the customer owes |
| “£5,000 plus VAT” | £6,000 |
| “£5,000 including VAT” | £5,000, of which VAT is £833.33 |
| “£5,000” (nothing about VAT) | Usually £5,000, treated as VAT-inclusive |
Steps to take
- Check the contract, quote, emails and terms and conditions
2. Explain that you are VAT-registered and must account for VAT to HMRC
3. Send a statement showing the VAT due
4. If the contract says “plus VAT”, chase it as a debt. Consider a letter before action, then the small claims court
5. Under standard accounting, you have already paid the VAT, so claim bad debt relief once the debt is more than 6 months overdue and written off
If you registered late
If you registered after the work was done and backdated, customers who agreed a price without VAT don’t have to pay the extra. You must account for VAT out of what you charged. See invoicing before your VAT number arrives.
Business vs consumer customers
VAT-registered customers can usually reclaim the VAT, so they are rarely out of pocket. Explain this when you chase. Consumers can’t reclaim VAT, so make it clear in every quote whether the price includes VAT.
Example
A decorator quoted a homeowner “£4,000” and registered for VAT before invoicing. The homeowner pays £4,000. The decorator must declare £666.67 VAT and keep £3,333.33. Future quotes should say “£4,000 plus VAT at 20%”.
Preventing the problem
- Always say “plus VAT” or “including VAT” on quotes and contracts
- Put your VAT number on your quotes
- Use clear terms and conditions
- Use credit control software to chase overdue invoices
Handling a VAT dispute with a customer
Keep your original invoice, the customer’s correspondence and any credit note in one place. If you agree to reduce the price, issue a credit note showing the VAT adjustment rather than editing the original invoice. If the customer simply doesn’t pay, you can claim bad debt relief once the debt is more than 6 months overdue and written off in your accounts. Don’t reduce the VAT on your return just because a customer is disputing a bill.
Frequently asked questions
Can I take the VAT off the invoice if the customer won’t pay it?
Only with a credit note. You still owe VAT on what you are paid.
Is VAT recoverable through the courts?
Yes, if the contract included it.
Do I have to pay the VAT before the customer pays?
Under standard accounting, yes. Cash accounting avoids this.
Can I charge late payment interest?
For business customers, statutory interest may apply under the Late Payment of Commercial Debts Act.
Related: VAT on credit notes.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT disputes with customers. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
