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HMRC internal manual

VAT Refunds

Claims for overdeclared output tax: What can be claimed: Subsection (1) of Section 80 of the VAT Act 1994

Under Section 80(1), claims may be made to recover amounts overdeclared as output tax on a VAT return. 

The most common generators of such claims are judgments of the courts holding, for example, that a given supply is not subject to VAT at the standard rate but at the zero rate. A claim by taxable persons under these circumstances would be a claim under Section 80(1).

Claims made to recover amounts disclosed by a taxable person as being an underdeclaration of output tax where it later turns out that the disclosure was wrong are within the scope of this subsection.

This subsection also covers claims for output tax overdeclared as a result of a failure to make an adjustment under Regulation 38 of the VAT Regulations 1995 - see the decision of the VAT & Duties Tribunal in General Motors Acceptance Corporation (UK) Plc (VAT Tribunal Decision 19989; [2007] BVC 2302 - paragraphs 75-77).

For example:

Anton Ltd supplied an E-Type Widget to Berta Ltd for £100 plus VAT (£17.50). Six months later, Anton Ltd reduced the price of the widget to £50 and issued a credit note to Berta Ltd for £50 plus £8.75 VAT.

Regulation 38 requires that Anton Ltd reflects that adjustment in the next return after the change of consideration was entered in the business records. If that isn’t done, the return is in error because it includes an amount declared as output tax that wasn’t due as such. The result is that Anton Ltd has a claim under Section 80(1) of the VAT Act 1994.