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VAT 3 year time limit post de-reg tax claim

VAT 3 year time limit post de-reg tax claim

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My client deregistered from VAT earlier this year. When he de-registered, he had an outstanding invoice to a supplier dated June 2003 which he had been disputing and had gone to legal process. He has subsequently lost and had to pay in full (in May and June of this year), and wants to reclaim the VAT amounting to some £6k.

The form refers to claims only being valid up to 3 years after the tax point, however, I recall seeing an article which claimed that the 3 year cap was under challenge.

It seems anomolous that the rules now require you to repay input tax if you have not paid the supplier within 6 months of the due date.

Can anyone advise if this has been established and on the facts whether there is any argument in support of claiming now.
Nigel Wayne

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By AnonymousUser
20th Jul 2007 16:16

Bad Debt w/o rules
Looking at this from the supplier's position re VAT, Is this not covered under the bad debt rules - the supplier should have recovered the Output VAT after 6 months of the debt being unpaid. The output VAT became payable again when the case was settled (or the money received?), therefore as I understand it the tax-point changes to the date the case was settled (or the money was paid) - therefore he can recover the VAT - I am sure I have read this in the VAT notes under the Bad Debt w/o rules, however unfortunately I don't have time to check it up at the moment.

HOWEVER just had another read through of the question (should have read it properly first!) - I don't think the problem is the 3 year rule, but may be that the case was settled after the client de-registered, therefore if the tax point moves to this date he would possibly not be able to make a claim anyway - complicated - perhaps someone else has a little more time to check on this.

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By theaardvark
20th Jul 2007 16:09

Fleming & Conde Nast
The 2 cases regarding the 3 year cap are awaiting hearing at the House of Lords. However, they both deal with its application to errors made prior to its introduction in 1997.

Did the supplier extend the due date of payment until the dispute was settled? If so, there was no requirement to pay back the input VAT.

Otherwise, it's not clear that the 3 year limit applies to the recover of repaid input VAT where consideration for the supply is subsequently paid. No error has been made and there is, therefore, no correction.

I would recommend submitting the claim. You can decide whether to argue with HMRC if they reject it.


Paul Taylor
Senior VAT Consultant

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