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HMRC internal manual

VAT Refunds

Late claims for input tax: The law: Community law - Sixth Directive

With effect from 1 January 1978 to 31 December 2006, the Articles in the Sixth Council Directive (77/388/EEC) that governed the deduction of input tax are to be found in Articles 17 to 20 until 31 December 2006. 

However, it is in Article 18 where you find the provision that set out when input tax is normally to be deducted and makes allowance for late deduction.

“Rules governing the exercise of the right to deduct

  1. To exercise his right of deduction, a taxable person must:
(a) in respect of deductions pursuant to Article 17(2)(a), hold an invoice drawn up in accordance with Article 22(3);

(b) in respect of deductions pursuant to Article 17(2)(b), hold an import document specifying him as consignee or importer and stating or permitting the calculation of the amount of tax due;

(c) in respect of deductions pursuant to Article 17(2)(c), comply with the formalities established by each Member State;

(d) when he is required to pay the tax as a customer or purchaser where Article 21(1) applies, comply with the formalities laid down by each Member State;

(e) in respect of deductions pursuant to Article 17(2)(d), set out in the declaration provided for in Article 22(4) all the information needed for the amount of the tax due on his intra-Community acquisitions of goods to be calculated and hold an invoice in accordance with Article 22(3).
  1. The taxable person shall effect the deduction by subtracting from the total amount of value added tax due for a given tax period the total amount of the tax in respect of which, during the same period, the right to deduct has arisen and can be exercised under the provisions of paragraph 1.

However, Member States may require that as regards taxable persons who carry out occasional transactions as defined in Article 4(3), the right to deduct shall be exercised only at the time of the supply.

  1. Member States shall determine the conditions and procedures whereby a taxable person may be authorised to make a deduction which he has not made in accordance with the provisions of paragraphs 1 and 2.

3a. Member States may authorise a taxable person who does not hold an invoice in accordance with Article 22(3) to make the deduction referred to in Article 17(2)(d); they shall determine the conditions and arrangements for applying this provision.

  1. Where for a given tax period the amount of authorised deductions exceeds the amount of tax due, the Member States may either make a refund or carry the excess forward to the following period according to conditions which they shall determine.

However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.”