I cannot comment on the legal aspects of this thread but from a VAT perspective..... Debt collection services are usually exempt from VAT (rather than outside the scope) - that is the actual service of chasing debts are exempt. Compensation, fines or similar monetary penalties are usually outside the scope of VAT on the basis that there is no supply being made. From the details I've seen in this thread the £40 certainly looks like a genuine 'fine' and should be outside the scope of VAT. On a technical point, if you have made a payment to someone (the debt collector) then they should provide you with an invoice or pro-forma invoice. If VAT is charged then that invoice must contain a VAT number, tax point (date) and most importantly it should list which items on the invoice are VATable, which are exempt or outside the scope.