How to reclaim VAT on late-posted purchase invoices?
Why were invoices omitted?
Your main challenge is to identify why the invoices were left out of your accounting system. To quote HMRC:
“ If you had the necessary evidence to enable you to claim the input tax in the VAT accounting period in which it became chargeable, but did not record it in your VAT account, this is an error.”
If the omission was caused by, say, a delay in your normal accounting procedures, e.g. the budget holder who authorises payment of the invoices was on holiday, this would not be classed as an error. This is because the invoices had not passed the hurdles to enable input tax to be correctly claimed on your return, i.e. an authorised invoice. You will claim input tax on your next return in the normal way.
If the omission was due to an accounting error, e.g. the invoices were kept on the desk of the purchase ledger clerk by mistake for three weeks instead of being posted to the purchase ledger, this mistake will fall within the error correction rules.
Error correction rules
If the turnover figure on your next return will exceed £2 million, you can still include the £20,000 of unclaimed input tax in Box 4. This is because errors between £10,000 and £50,000 can still be included on a return if they are less than 1% of the outputs figure in Box 6. You must always consider the net error figure as far as this threshold is concerned.
Example. Abdel Florists underclaimed input tax on their last return by £20,000 on purchase invoices for plants and flowers but also omitted sales invoices from the return, with output tax of £5,000. The relevant figure for correcting the error on the next return is £15,000. The outputs figure in Box 6 must therefore exceed £1.5m.
Trap. If errors exceed the 1% limit, they cannot be included on a return and must be notified to HMRC on FormVAT652 .
Tip. The best route is to submit FormVAT652 to HMRC online because it takes away the “lost in the post” risk of a paper submission. You will get a submission reference number and email confirmation that it has been received.
Warning: HMRC delays
In previous years, HMRC usually processed and repaid VAT652 claims within two weeks, assuming the repayment team didn’t make extra checks to review your claim. However, it is now quoting a turnaround time of 40 working days to process claims and - we understand - this target is not being met in many cases. It is therefore preferable in most cases to justify why your input tax can be claimed on the next return if possible, i.e. because it falls within the type of situation in the first example above.
Tip. If the invoice omission is discovered one day after you submit your return, the VAT652 route will probably get the VAT money into your bank account more quickly than waiting until the next return is due. However, that would not be the situation if you discovered it, say, two months after the submission date.
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