HMRC has recently updated its guidance on when businesses can reclaim input VAT, offering a more flexible and practical approach to late claims.

Previously, HMRC was strict about timing. Businesses were expected to claim input VAT in the correct VAT period – the one in which the VAT became chargeable – and supported by the correct evidence, such as a VAT invoice. If VAT was claimed in a later return, HMRC often required it to be treated as an error, meaning extra paperwork and time spent correcting the return.

What’s changed?

Under the new policy, set out in HMRC’s internal manual VIT33000, HMRC has confirmed it will now be more open to allowing late claims, as long as there’s a reasonable explanation.

This means that if a late claim is due to sensible business processes – rather than carelessness – it’s likely to be accepted. Examples include:

• Taking time to complete due diligence when assessing whether costs are deductible or not.
• Internal accounting cut-off dates, where invoices received after a specific date are processed in the next VAT period.

As long as the late claim doesn’t result in a financial advantage (such as reclaiming extra VAT through partial exemption), HMRC will usually exercise discretion to allow it.

What hasn’t changed?

HMRC will not accept late claims if the delay was caused by carelessness or poor record-keeping. And the four-year cap on reclaiming input tax still applies – this policy doesn’t extend that timeframe.

Our view

This is a positive development for businesses, particularly those with robust internal processes or complex cost structures. It provides more flexibility, without penalising companies that take a careful approach to VAT compliance.

If you’re unsure how this change could affect your VAT claims, or if you’d like a review of your VAT recovery processes, speak to your local bk plus advisor.