VAT return entries that need HMRC’s written approval

Key points

• The payback and clawback regulations ensure that input tax claims are correctly adjusted when a business changes its intentions from making ‘taxable’ to ‘exempt’ supplies or vice versa.
• If a business needs to estimate an input tax claim on a VAT return it requires HMRC approval before making the estimate and also for the method of calculation.
• Problems can arise given delays in HMRC responding to taxpayers’ correspondence.
• The biggest revenue risk for HMRC with the payback and clawback rules is a business not knowing they exist.

The payback and clawback regulations are an important part of the VAT legislation to ensure that input tax claims made by a business are correctly adjusted when it changes its intentions from making ‘taxable’ to ‘exempt’ supplies or vice versa. I will explain how they work in this article. However unbeknown to me until a few weeks ago a...