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HMRC internal manual

VAT Refunds

Late claims for input tax: What can be claimed

Under Regulation 29 of the VAT Regulations 1995, a VAT registered person is, subject to the partial exemption and Capital Goods Scheme rules, entitled to deduct or claim any input tax that he has incurred in the course and furtherance of his taxable business activities - see the guidance in V1-13 for details on who can deduct input tax and under what circumstances.

In practice, we would expect any claim submitted under Regulation 29 to set out the total amount of input tax underclaimed and all of the unassessed liabilities that will be required to be set off under Section (3A) of the VAT Act 1994 - see the articles in this guidance on what constitutes a claim and on set-off for more details.

It is important to remember that a claim under Regulation 29 in respect of a given accounting period is a claim for the difference between what the claimant deducted for the accounting period and what he was entitled to deduct. Thus, if the records for an accounting period show that the claimant failed to claim input tax to which he was entitled and also deducted as input tax amounts that he was not entitled to, the claim should take both into account.

The unassessed liabilities that must be set out in the claim include

  • any underdeclaration of output tax in accounting periods covered by the claim;
  • any amount that could have been assessed as VAT, interest, surcharge or penalty (even if it’s now out-of-time) for whatever accounting period provided that any assessment would have been founded on the same mistake that led to the claim.

You should not refuse a properly calculated gross claim simply on the grounds that the claimant has not provided a schedule of liabilities. However, where the liabilities are not disclosed in the claim, you should ask that the claimant provide the necessary information as soon as possible.

At the end of the day, if you are not satisfied that the claimant has disclosed all of the liabilities that must or can be set off under Section 81 of the VAT Act 1994 and Section 130 of the Finance Act 2008, the claim will not be paid.

Before paying the claim, you should check that no further liabilities (established debts in relation to any of HMRC’s taxes) have arisen since the claim was made.

You will find further details on the policy on set-off between taxes and the mechanics of accounting for it in the Debt Management & Banking Guidance, see DMBM700000.