Making a late claim for input tax

When a business incurs input tax on its purchases, it’s entitled to reclaim it from HMRC, provided the business has the correct evidence to make the claim.

But sometimes, through an oversight, it isn’t claimed on time; so, what are the rules for claiming back input tax late?

Normally, the input tax on a purchase should be claimed in the VAT period in which it is incurred. So, if a business’s VAT return period ends in July and it receives an invoice dated 15 June, it should be claimed in the period ending 31 July. If a business is on cash accounting and pays the invoice on 20 August, it can claim the VAT back on the return ending 31 October.

Late claims for input tax

If a business does not claim back the VAT on a purchase invoice in the correct period, HMRC considers that it needs to treat it as an ‘error correction’.

If the total of all ‘errors’ results in a net adjustment of VAT of less than £10,000, it can be adjusted on the VAT return, but it will need to be recorded separately in an ‘error correction account’ rather than in the normal purchases records.

If the net total of all errors in the period results in an adjustment of more than £10,000, it will need to be notified to HMRC separately using a form VAT 652 and a separate repayment will be made by HMRC directly to the business about six weeks later.

Time limits for making a claim

A business has four years to claim back any unclaimed input tax. However, the four years run from the due date of the return on which it should have claimed back the VAT, not from the date of
the invoice, so this gives a business some leeway

Example: Still time to claim

For normal accounting, a business receives an invoice dated 15 April 2022 and fails to reclaim it on time in the period ending 31 May 2022.

The due date for the return is 30 June 2022, so the claim can be made on a return or VAT 652 up to 30 June 2026.

If the business was on cash accounting and the invoice was paid on 10 June 2022, it should have been claimed in the period ending 31 August 2022. The due date would be 30 September 2022 and so the claim could be made up until 30 September 2026.

Late invoices

If an invoice is received late because of a delay by the supplier, or it gets lost in the post and it is received in a later VAT period, it would not count as an error correction because the business did not have the correct evidence to make the claim at the time.

In these circumstances, the invoice can be claimed in the period in which it is received, or paid if on cash accounting, in the normal way and no error correction is required.

Pre–registration input tax

If a business incurs input tax on goods that it still has on hand at the time of registration, it can go back up to four years from the date of the invoice, and for services for a period of six months.

The claim should be made on the first VAT return, but if it is not, the business can still claim it back up to four years after the due date for the first VAT return. This means that in exceptional
circumstances, a claim can be made for the VAT on goods purchased up to eight years previously.

Practical tip

If a business fails to claim back input tax on time, it has up to four years to make the claim. If the total errors are more than £10,000, it will need
to make a separate error correction.