VAT: a new rule - July 2003

As from 1st January 2003, a new rule applies regarding the claiming of input tax. Anyone who records their VAT on an invoice basis must now take notice of when that invoice is paid. If the invoice is not paid within 6 months of the date of supply, the VAT element has to be adjusted on the next VAT return and repaid to HM Customs & Excise.

For example, Joe Bloggs supplied you with some wood on 15th January 2003 and the input VAT was included on the March VAT return. The invoice was not paid by you until after 15th July 2003 (more than 6 months), therefore the input VAT needs to be deducted on the September VAT return. When the invoice is then paid at a later date, you can then reclaim the input VAT on your next return.

Please feel free to contact us to discuss the application of this rule to your business.

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