Where VAT has been incorrectly charged it is normally resolved through the issuing of a credit note and refund. However, what happens when the supplier becomes insolvent for example and is unable to pay the VAT that has been incorrectly charged? It may now be possible to submit a claim to HMRC for in order to obtain a refund of the VAT.

This is only applicable in circumstances where HMRC deem it ‘impossible or excessively difficult’ for the customer to reclaim the money from the supplier, (as mentioned above if the supplier has become insolvent) and is therefore unable to refund the VAT due.

HMRC have reviewed their stance

Up until now, HMRC have been reluctant to accept such claims, encouraging creditors to resolve the issue with their supplier directly, suggesting it is a ‘commercial matter between the two parties’. However, there now appears to be an opportunity to recover the VAT which will come as a relief for many businesses who have clearly paid VAT that was not due.

Getting it right

We understand that HMRC will publish further guidance in due course, but in the meantime, if you believe you are entitled to make a claim, please get in touch with a member of our dedicated VAT team or contact HMRC directly as soon as possible.

We have a wealth of experience and a comprehensive understanding of how HMRC operate, meaning we’re able to deliver the best results possible for you and your business. Our experts have experience on both sides of the fence, having previously worked for HMRC, making them ideal advisors for any VAT or indirect tax related issues.