- 19 Oct 2018
- Comments Off on How to handle late VAT claims
Tax returns are one of the few areas of tax issues that most of us look forward to. That’s why it’s always a disappointment when it turns out that you’ve missed the chance for a VAT claim. However, you still have a chance even if your VAT claim is late. Find out how to make the best of late VAT claims.
When are late VAT claims acceptable
You may be surprised that even if you’ve had purchases that haven’t had their VAT claimed for as long as several years there is still a way to reclaim that VAT. In most cases, that is unless you utilise a cash accounting scheme, the VAT paid on purchases should be returned by the end of the quarter in which you’ve received the product or service that you’ve paid for. This doesn’t make this the final time limit – in reality, you have four years, counting from the return period in which got evidence that VAT was paid. It’s important to note that this is not four years from the purchase itself. So if, for example, you’ve purchased a service on September 17th 2018 and received a VAT invoice for it at a later date, e.g. in October, you have until the end of December 2022 to claim input tax for the product or service.
The validity of late claims
With all that said, it is possible to claim input tax after the VAT period has ended, as long you do it within that four-year time period. The amount you are entitled to, however, has to be recalculated based on the time elapsed. The circumstances that applied when you were first able to make the claim also play a role so that if the input tax you want to claim is for a purchase that you’ve made before you were entitled to it, you can not reclaim it currently either.
If your business is partially exempt, the matter becomes even more complicated. In such cases, annual adjustments are affected, which affects the VAT de minimis limits. Additionally, if the quarterly VAT period that the input tax was incurred in was earlier than four years ago, you can no longer make a correction, but you are still required to review the annual adjustment. Though your input tax for the earlier period is still reclaimable, the amount you can reclaim will most likely be subject to change.