October 25, 2012

Recovery of Input Tax – ‘Right Tax Right Time’

HM Revenue and Customs recently issued an amended version of Notice 700 and have specifically noticed changes to the guidance on the timing of the recovery of input tax that came as somewhat of a surprise.

It say that if the VAT invoice is dated and available in the VAT accounting period covered by the tax point, it must be claimed in that period.

If that input tax cannot be claimed in the VAT accounting period covered by the tax point date, it should be claimed in the VAT accounting period in which the VAT invoice is received (which in theory must be the first one after the tax point date as a supplier must issue a VAT invoice within a month of the tax point and; any other input tax claim must be made by voluntary disclosure. This means that if you do not claim the input tax in the correct period then this is an error. See section 4 of Public Notice 700/45 How to correct VAT errors and make adjustments.

At one time HMRC didn’t seem to mind when input tax was recovered so long as it was not claimed early or more than 4 years after the tax point date.

This latest version of the Public Notice is closer to what the law requires but it is really not practical and we assume it is intended to make the calculation of penalties easier. However, do HMRC really want a voluntary disclosure with every VAT return submitted?

Elysian Associates
October 2012
00061

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