Unless you have opted for Flat Rate or Cash Accounting, VAT is normally reclaimed when you get an invoice from your supplier.

However, some invoices will be disputed and the disputes can drag on for months. Its easy to spot old supplier invoices by looking at your Aged Creditors Report.

But having reclaimed the VAT you might not realise that after 6 months the VAT will need to reversed on your next VAT return. The rules are in VAT Notice 700…..

VAT Notice 700: the VAT Guide

10.6A Repayment of input tax if you do not pay your supplier

For supplies received on or after 1 January 2003 you are required to repay any input tax you have reclaimed if you have not paid your supplier within 6 months of:

(a) the date of supply (usually taken as the invoice date), or if later (b) the due date for payment

Take a look at your Aged Creditors now and if you discover supplier debts older than 6 months provided the net value of errors is less than £10,000 you can simply correct it on your next return, if the error is more than £10,000 you will need to use Form VAT 652

There is a possible alternative, normally the 6 months is counted from the due date not the invoice date, so you could agree new terms on the disputed invoice and extend the due date.

steve@bicknells.net