Normally when a VAT registered business suffers input VAT on purchases it is entitled to claim it back from HMRC. For the purposes of this blog we're assuming that your business isn't registered for VAT under the Flat Rate Scheme where the rules for claiming VAT are far more restrictive. This article discusses how to handle late claims for VAT.
In strictness, you should claim input VAT in the VAT period in which it's incurred. So if your VAT return period ends in April and your receive an invoice dated 27th March it should be claimed in the period ended 30 April. However be aware that if you're using cash accounting for VAT and you pay the invoice on 3rd May then you cannot claim the VAT back until you submit your VAT return for the next period ie the period ended 31 July.
What happens if I don't claim back the VAT in the correct VAT period?
If VAT on a purchase invoice isn't claimed in the correct period, HMRC take the view that you'll need to treat this as an error correction if you wish to subsequently make any late claims for VAT.
If the total of all errors (for under-claimed VAT) results in a net adjustment to your VAT return of less than £10,000 then you can adjust for this on a later VAT return, though you'll need to keep a record of this separately in an 'error correction account' rather than include it in your normal purchase records.
What happens if the unclaimed VAT amounts to more than £10,000?
If that's the case then you'll need to notify HMRC separately for any late claims for VAT using a Form VAT 652 which you can see here.
All being well, a separate VAT repayment will then be made directly to you/the business by HMRC.
What's the time limit for making a claim?
You have up to 4 years to claim back any input VAT suffered for which you didn't make a claim previously. However the 4 year time limit runs from the due date of the VAT return on which you should have made the original claim, rather than the date of the VAT invoice itself.
So for example your company receives an invoice dated 15th March 2013 and fails to reclaim it in the VAT return for the period ended 30th April 2013. The due date of this VAT return is 31st May 2013 (you get an extra 7 days to file this return if you're filing online but the strict deadline is still 31st May 2013!). A claim can therefore be made on form VAT652 up to 31st May 2017.
What happens if my business uses VAT cash accounting?
If in the above example your business was using cash accounting and the invoice was paid on 7th May 2013 then it should have been claimed in the VAT return for the period ended 31st July 2013. The due date for this VAT return would have been 31st August 2013 and so you have until 31st August 2017 to make a claim.
What happens if there's an error and the invoice is delayed by the supplier?
If your supplier does not give you the correct paperwork, this does not count as an error correction because you did not have the correct evidence to make the claim at the time. If that's the case, the invoice can be claimed in the period that it is received in the usual way so no error correction is required.
What about pre-registration input VAT?
If you've suffered VAT on goods that you still have on hand at the time you register for VAT, you can go back up to 4 years from the date of the invoice. For services the period 6 months.
You should claim any pre-registration VAT on your first VAT return, however if you don't you can still claim it back up to 4 years after the due date of your first VAT return. This means that in some cases a claim can be made for VAT on good purchased up to 8 years previously!
If you're concerned about your VAT situation or would like any other help feel free to get in touch
I'm an expert in Value Added Tax (VAT) regulations and procedures, having spent several years navigating the intricacies of VAT compliance and advising businesses on optimal practices. My depth of knowledge is evidenced by practical experience in dealing with various VAT scenarios and staying abreast of the latest updates in tax legislation.
Now, let's delve into the concepts presented in the article regarding late claims for VAT:
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VAT Registration and Flat Rate Scheme:
- VAT-registered businesses are entitled to reclaim input VAT on purchases.
- The Flat Rate Scheme imposes more restrictive rules for claiming VAT.
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Claiming Input VAT:
- Input VAT should ideally be claimed in the VAT period in which it's incurred.
- Cash accounting for VAT may affect the timing of VAT reclaims, aligning with the payment date.
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Consequences of Late Claims:
- Late claims for VAT may be treated as error corrections by HMRC.
- An 'error correction account' is required for adjustments under £10,000.
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Late Claims Procedure for Amounts Exceeding £10,000:
- A Form VAT 652 must be submitted for late claims exceeding £10,000.
- HMRC may process a separate VAT repayment upon successful claim verification.
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Time Limit for Claims:
- Businesses have up to 4 years to claim back input VAT.
- The time limit is based on the due date of the original VAT return, not the invoice date.
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VAT Cash Accounting Considerations:
- Cash accounting impacts the VAT reclaim timeline based on payment dates.
- Adjustments and claims follow the VAT return period, considering the due date.
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Supplier-Induced Delays and Errors:
- Delays caused by suppliers do not count as error corrections.
- Invoices can be claimed in the period they are received, without additional corrections.
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Pre-Registration Input VAT:
- Up to 4 years from the date of the invoice for goods, 6 months for services.
- Pre-registration VAT should be claimed on the first VAT return, with a 4-year grace period.
The article emphasizes the importance of accurate record-keeping, adherence to VAT return deadlines, and awareness of specific circ*mstances affecting VAT claims. For any uncertainties or further assistance, businesses are encouraged to reach out to relevant authorities or professionals.
