The next step

Detailed commentary on evidence required to reclaim input tax

[Memo]

Our VAT number checker plus macro fix pdf

[Document]

Notice 48

[Weblink]

HMRC’s online service

[Weblink]

Overclaimed VAT - is it always repayable to HMRC?

Reclaiming VAT

In common with all registered businesses our subscriber submits regular returns to HMRC and accounts for the VAT he charged on sales net of that paid on purchases (input tax). He wasn’t aware of a problem with one of his returns until HMRC contacted him. It said that one of his suppliers had not charged VAT correctly and this prevented our subscriber from claiming a deduction for it. The trouble was that the supplier had ceased to be registered for VAT and from that point wasn’t entitled to charge VAT or issue a VAT invoice.

Trap. Responsibility for checking the validity of a VAT invoice lies with the recipient.

Tip. Use our VAT number checker or use HMRC’s online service to check if a supplier’s VAT number is correct (see The next step ).

Tip. It’s good practice to check the VAT number of a supplier before you use them for the first time. Their VAT number should appear on their website, if they have one, and usually any headed paperwork. Of course, a check isn’t really necessary if a supplier is a well-known big business such as a high street retailer or wholesale chain.

For detailed commentary on evidence required to reclaim input tax, visit https://tips-and-advice.co.uk , Download Zone, year 24 issue 5.

Invalid claims for input tax

There are various reasons why purchase invoices might show VAT when they should not. We’ve seen businesses add VAT simply because they think they must, despite not being registered. Others where, as in this case, the supplier ceased to be registered or was not entitled to be registered. Whatever the reason, as the purchaser you’re not entitled to reclaim VAT input tax unless it’s been properly charged. The good news, especially for our subscriber, is that there’s an exception.

HMRC concessions

HMRC has some flexibility where an invalid claim for input tax has been made. It operates a number of extra statutory concessions which modify or override the normal rules in order to achieve a fair outcome. Our subscriber should be entitled to take advantage of one of the concessions. A full list of concessions is set out in VAT Notice 48 (see The next step ).

Unregistered trader made liable

HMRC has the power to go after unregistered businesses and obtain payment from them for any amount they have incorrectly charged as VAT. Further, the person or business who received the supply on which VAT was incorrectly charged (our subscriber) isn’t required to repay the input tax reclaimed if, in the words of the concession, “...it’s clear that the taxable person who received the supply has treated such an amount as input tax in good faith.”

Tip. If the invalid VAT relates to a supplier you’ve used for the first time, your case for HMRC to apply the concession will be stronger if you’ve followed the Tip above.

To download our VAT number checker and links to HMRC’s online service and Notice 48, visit https://www.tips-and-advice.co.uk , Download Zone, year 24 issue 5.