VAT on unpaid supplier invoices
Under the normal standard VAT scheme input VAT (VAT on purchases) is claimed for the VAT period during which a VAT invoice is received or, if earlier the date on which the goods or services are received.
However if all or part of a supplier invoice remains unpaid for six months the VAT claimed on the outstanding amount must be repaid to HMRC. If and when the outstanding amount is finally paid then the VAT can be reclaimed again.
This is an important point which is often overlooked so procedures should be put in place to make sure it is addressed each time a VAT return is completed. HMRC can treat any failure to repay the VAT as an error and charge a penalty of up to 30% of the VAT involved.
If you have any questions regarding any accounting or taxation matters then please don’t hesitate to get in touch with us. We are an ACCA registered accountancy practice located in the Northamptonshire village of Lamport. From Michael Paul Accountants Northampton, Kettering, Market Harborough and Corby are all within easy reach.