Reclaiming VAT
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Discussion

Gregorypeck

Original Poster:

122 posts

203 months

Friday 6th September 2013
quotequote all
Just started a new job and come across a bit of an anomaly. The company started a new business line in July and as usual, charged VAT on its supplies. However, I've found that these supplies are exempt from VAT. If we now start charging clients without adding VAT, they're likely to ask us to repay the VAT we've charged them up to now. Can we then go back to HMRC and reclaim the VAT we've incorrectly charged? The amount concerned is about £30k over a 2 month period.

Eric Mc

125,770 posts

295 months

Friday 6th September 2013
quotequote all
Are they Exempt, Zero Rated or Outside the Scope?

Were your customers able to reclaim the VAT that you (possibly incorrectly) charged them?

Gregorypeck

Original Poster:

122 posts

203 months

Friday 6th September 2013
quotequote all
Eric Mc said:
Are they Exempt, Zero Rated or Outside the Scope?

Were your customers able to reclaim the VAT that you (possibly incorrectly) charged them?
Definitely Exempt. No, they weren't able to claim the VAT.

Eric Mc

125,770 posts

295 months

Friday 6th September 2013
quotequote all
You will be obliged in law to refund to them the VAT that you incorrectly charged them.

You should, of course, notify HMRC of the error you made and apply to them for the VAT to be repaid to you. The details as to how you go about this are set out in VAT Notice 700/455

http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...

As an aside, if you are making a substantial volume of sales that are properly "VAT Exempt" (NOT Zero Rated or Outside the Scope), you may need to read up on the "Partial Exemption" Rules. In other words, if a large chunk of your sales are VAT Exempt, you might find that you will not be able to reclaim all the Input VAT you will have paid on your costs.

Edited by Eric Mc on Friday 6th September 13:56