Businesses that under-claimed input VAT
for accounting periods ending between 1
April 1973 and 1 May 1997 can now claim
it back. The Finance Bill has brought in
transitional rules allowing businesses to
make VAT repayment claims for periods
up to the date the present three-year time
limit for claims was introduced.
The change follows a ruling by the Lords
in January 2008 that the three-year limit
does not have effect for any right to claim
input tax for periods before 1 May 1997
because no transitional period was
provided at the time. The new transitional
period, which rectifies this, runs up to 31
March 2009.
Claims for repayment because a trader
accounted for more output tax than was
due became subject to a three-year time
limit on 4 December 1996. The
transitional rules will allow claims for
periods up to that date.
Correcting more recent errors in VAT
returns is about to become easier as well.
Atpresent, if you find you have made
mistakes in a VAT return, you can correct
them in the return for the period in which
you discover them, provided the net
amount involved is not more than £2,000.
From 1 July 2008, that limit will increase to
£10,000 or 1% of turnover, whichever is the
greater, subject to a maximum of £50,000.
You can only correct errors that occurred
in accounting periods that ended within
the previous three years. If you discover
errors amounting to more than the new
limit you cannot correct them in a VAT
return but must disclose them in writing to
your local VAT Business Advice Centre.
You will need to give full details of the
amount of each error and when and how
it arose.
Making a voluntary disclosure of errors
will avoid the misdeclaration penalty that
HM Revenue & Customs (HMRC) may
charge if it discovers errors during an
enquiry. However, HMRC may charge
interest on underpaid VAT, depending on
the circumstances of the error.
Like all taxes, the VAT rules change
constantly. If you need help with your VAT
returns, or have questions about any
aspect of VAT, please get in touch.
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