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HMRC internal manual

VAT Refunds Manual

Circumstances for a claim for refund: overview

A business may claim a refund of VAT where

  • an error has been made in accounting for VAT or
  • VAT is accounted for in relation to a supply that changes or never actually takes place.

Claim where an error has been made

A claim may be made to correct an error that the claimant has recognised. However, the following, if done properly and at the right time, are not the correction of errors and will not lead to claims either under section 80 of the VAT Act 1994 or under section 25 of the VAT Act 1994 and regulation 29 of the VAT Regulations 1995:

  • retail scheme annual adjustments, or other adjustments required when a person stops using a particular retail scheme,
  • adjustments under the Capital Goods Scheme,
  • an approved estimation procedure,
  • partial exemption adjustments,
  • partial exemption claw-back and payback adjustments,
  • exports and intra-European Community supplies of goods,
  • issuing or receiving credit and debit notes,
  • claims for bad debt relief, and
  • pre-registration and post deregistration expenses.

Claim where VAT is accounted for in relation to a supply that changes or never actually takes place

A claim for a VAT refund may arise, for example, where VAT is accounted for when a trader receives an advance payment for a supply that, in the event, never takes place.

This is because the trader will have had to account for output tax when he received the advance payment but, when the customer cancels his order, for example, that output tax will turn from having been properly due to being an amount declared as output tax that wasn’t due as such.