VAT - 22.06.2020

How to make a successful late VAT claim

Your bookkeeper has found a batch of purchase invoices on which VAT hasn’t been reclaimed. They date back a few years and you think that it may be too late to reclaim the VAT. What is and isn’t allowed?

Right to claim VAT

The rules for reclaiming VAT paid on purchases of goods or services (input tax) are easily misunderstood. Strictly, input tax should be claimed for the VAT return period in which the “tax point” occurred. The tax point is usually either the time the goods or services were supplied to you or when you paid for them, whichever is earlier. Generally, input tax claimed at any other time is a correction so subject to the rules which apply.

In practice

In real life there are often situations when a claim can’t be made in the proper VAT period. For example, if you haven’t received the necessary evidence, e.g. an invoice. Whatever the reason, a correction can be made by reclaiming the input tax in a later return or via a standalone claim.

Tip. If the amount you are claiming is significant, rather than wait until your next return to get your VAT back, make a standalone claim immediately.

For detailed commentary on how to make VAT corrections, visit http://tipsandadvice-tax.co.uk/download (TX 20.19.07).

Time limit

The time limit is probably the most misunderstood rule. You probably know that the time limit for reclaiming input tax is four years, but that’s not the whole story. The four years runs not from the tax point, e.g. the invoice date, but from the due date for the VAT return on which the claim ought to have been made.

Example. Acom Ltd prepares its VAT returns for the quarters ending 31 May, 31 August, 30 November and 28 February. It purchased a widget for which the invoice date (and tax point) was 10 March 2016. A bookkeeping error meant Acom hasn’t yet recovered the input tax. It’s now late June 2020 but Acom is still in time to reclaim the VAT; it has until 30 June 2020 to do so, i.e. four years from the due date for the VAT return due for the quarter ended 31 May 2016. It can include the claim on its return for the 31 May 2020 quarter as long as it’s submitted by 30 June, or separate notification to HMRC by the same date.

Tip. The period between tax point and claim can be even longer where the purchase was made before registration for claims.

Example. Bcom Ltd was registered for VAT on 1 April 2016. Its VAT quarters end on 30 June, 30 September and so on. In June 2020 Bcom’s new bookkeeper reviews its VAT records and finds that the company didn’t reclaim input tax on some purchases of stock and materials bought in July 2015. Bcom has until 31 July 2020 in which to reclaim the VAT - four years from the due date of the return period in which it could have first made a claim, that was its first VAT return for the period ended 30 June 2016, due by 31 July 2016.

Trap. Take extra care if your business is partially VAT exempt and you’re making a late claim for input tax for general expenses, e.g. overheads like telephone bills. The proportion of VAT you can reclaim is that applicable to the VAT period in which the purchase was made and not the one in which you make the claim (see The next step ).

For an example of a late VAT claim for a partially exempt business, visit http://tipsandadvice-tax.co.uk/download (TX 20.19.07).

The time limit for reclaiming VAT runs from the due date for the VAT return covering the date of purchase. That means it can be up to four years and three months or considerably longer for pre-registration purchases. Use a standalone claim to get a refund sooner.

© Indicator - FL Memo Ltd

Tel.: (01233) 653500 • Fax: (01233) 647100

subscriptions@indicator-flm.co.ukwww.indicator-flm.co.uk

Calgarth House, 39-41 Bank Street, Ashford, Kent TN23 1DQ

VAT GB 726 598 394 • Registered in England • Company Registration No. 3599719