United KingdomManual

The UK has a standard VAT rate and one reduced VAT rate. In addition, a number of items are zero rated

UK Statute of limitations on VAT: A Complete Guide

Navigate the complexities of the UK statute of limitations for VAT. Identify the periods after which legal action becomes impossible and plan your VAT compliance accordingly.

What is the Statute of Limitations in the VAT Context?

The statute of limitations is a crucial legal time frame within which authorities can investigate tax liabilities, including VAT. Likewise, it determines the period taxpayers have to claim VAT reimbursements on invoices received.

Why is important the statute of limitations for businesses?
Understanding the statute of limitations is vital for effective VAT management. It dictates the time frame within which you can retroactively claim VAT on received invoices, and how far back tax authorities can go to assess VAT on issued invoices.

For example, if you forgot to account for the VAT paid on an invoice received some time ago, you shall consider the statute of limitations. You will only be able to deduct it now if this period is not expired. If you did not deduct this input VAT in the corresponding reporting period, this is considered an error, and you may need to correct the VAT return for such reporting period.

How Do Limitation Periods Affect Different VAT Claims?

In the UK, the general statute of limitations for VAT is four years. Here’s how it applies to various VAT scenarios:

  • Input VAT: Must be claimed in a VAT return filed no later than the end of the fourth year following the year in which the deductible VAT was due. Special rules apply for pre-registration expenses.
  • Output VAT: The obligation to pay VAT also falls within a four-year limitation period. However, in cases of fraud or deliberate non-compliance, this can extend to 20 years. 

For pre-registration expenses, businesses can reclaim VAT on goods purchased within four years, provided they still possess the goods (or goods created from them). For services received, the limitation period is six months.

For further details, refer to HMRC's manual on VAT assessments and time limits.

You can find more details about time limits on VAT assessments in the UK in the manual published by HMRC about this topic.

When Does the Statute of Limitations Commence?

The clock on the UK statute of limitations starts ticking at the end of the accounting period where the invoice should have been declared, or the date of importation or other acquisition. More information can be found here.

Practical Implications

If you overlooked VAT paid on an old invoice, the statute of limitations will determine whether you can still claim it. If missed, this constitutes an error that may require a corrected VAT return for that reporting period.

Moreover, if you discover inaccuracies in your VAT declarations related to sales invoices, the statute of limitations will influence your ability to amend those returns.

Have a look at the section from our manual about UK corrective VAT returns.

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