Don’t forget to reclaim your VAT!

If your business has overpaid VAT for accounting periods ending between 1 April 1973 and 1 May 1997 you can still claim it back before 31st March 2009. Rules have been brought in to allow businesses to make the reclaims, after a ruling by the Lords in January that the three year limit does not have affect for claims for periods before 1st May 1997.

From 1st July 2008, the limit for errors being adjusted on VAT returns increases from £2,000 to £10,000 or 1% of the turnover, whichever is the greater, subject to a maximum of £50,000. Errors must have been made within accounting periods ending in the previous three years.

Where errors exceed the new limits, then the corrections cannot be made on the VAT returns. Instead a voluntary declaration will be needed to your local VAT office. This should avoid HM Revenue & Customs imposing a penalty on VAT underpaid, but not interest.