How Far Back Can You Claim VAT?

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HOW FAR BACK CAN YOU CLAIM VAT?

Whether it is an error or you are newly VAT registered, there are provisions made by HMRC to allow you to claim back historic VAT.  However, how far back you can go to make your VAT claim depends on your circumstances.

Scenario 1: You are newly VAT registered, how far back can you claim for VAT on purchases before registration?

The Rules

There is a time limit in place for backdating your claim for VAT paid before your registration date.  This is:

  • 4 years for goods you still have, or that were used to make other goods you still have;
  • 6 months for services.

How to Claim

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

  • invoices and receipts
  • a description and purchase dates
  • information about how they relate to your business now

Example:

Graeme started a consultancy business on 1 May 2015 and he bought a laptop for £1000+VAT.  His business grew and he employed a bookkeeper to help him at £500 plus VAT from 1 September 2016.  Graeme was required to register for VAT His VAT registration date was 1 August 2017. On Graemes first VAT return, he is allowed to reclaim VAT as follows:

On his laptop purchased on 1 May 2015, since he was still using it and is within the 4 year window;

On bookkeeping fees for 6 months prior to his VAT registration date from 1 February 2017.

Scenario 2: You have been VAT registered for a number of years and discover that bills have been missed out in your VAT workings so VAT has been underclaimed.

Errors can happen and invoices can get missed.  So in this circumstance, you are allowed to claim for back dated VAT by adjusting for the missed VAT on your current VAT returns, if it meets the following conditions:

  • below the reporting threshold;
  • not deliberate;
  • for an accounting period that ended less than 4 years ago.

If you do not meet all of these criteria you will need to report your VAT error to HMRC on a separate form (see below)

HMRC VAT Error Reporting Threshold

The current rules state that the VAT reporting threshold for an error is:

  • a net value of £10,000 (ie: the difference between what you owe HMRC and they owe you in respect of the error);
  • 1% of your box 6 figure (up to a maximum of £50,000).

HMRC Error Reporting Form VAT652

If you do not meet the above criteria for reporting your VAT error on your current VAT return, then you will need claim for your backdated VAT using a Form VAT652 and post it to HMRC at:

HM Revenue and Customs 
VAT Error Correction Team – SO864 
Newcastle 
NE98 1ZZ 

Regardless of your scenario, always keep full records of your backdated VAT claim including copies of invoices and details how you made your claim.

Related:

Can I Claim Back Pre Trading Expenses for my Start Up?

VAT Limits 2017/2018

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