VIT33000 | How to treat input tax: late claims for input tax

Input tax claims should be made in the accounting period in which the tax on the relevant goods or services became chargeable and the claimant holds the VAT invoice. This is referred to as the proper period.

There are times when a claim cannot be made in the proper period. For example, the supporting evidence may not have been received. However, there are other reasons for claiming input tax in later periods, such as:

• Businesses carrying out due diligence to get their tax affair right – examining invoices which may include deductible and non-deductible costs.

• Internal accounting procedures and governance – Business may have a cut-off date for processing invoices, e.g. 20 of the last month in the tax period. Invoices received from 21 would not be processed and therefore submitted in a later period.

Recovery of input tax outside the proper period is subject to the Commissioners’ discretion under Regulation 29. HMRC will allow late claims to input tax in the above circumstances and in specific cases, provided HMRC is satisfied that allowing the late claims in a later period does not lead to overclaiming input tax or less tax being payable than if the input tax was claimed in the ‘proper period’.

A partly exempt taxpayer should ensure that any late claimed input tax is recovered only to the extent that it would have been when the tax became chargeable.

HMRC staff should consult the VAT Deductions Team if they think the delay in claiming input tax is an attempt to manipulate a partial exemption method.

HMRC staff should consult Tax Administration Policy Team if they think the delay in claiming input tax has been contrived to avoid liability to any form of penalty.

HMRC has limited discretion to allow late claims to input tax. A claim cannot be made if the capping limit has passed for the return in which the tax should have been claimed, which is the proper period.

HMRC will not exercise discretion to allow late claims of input tax on VAT returns in a later period where there is evidence of careless error or repeated late claims.

If tax is not deducted in the proper period due to an error a business can recover the tax in a later period using the methods of correcting errors in section 4 of Notice 700/45 How to correct VAT errors and make adjustments or claims.