At a recent HFMA VAT Technical Sub-committee meeting, the issue of whether or not VAT can be claimed on an invoice that was previously unpaid for a period greater than six months was discussed.
This was a concern for some Trusts, as COS VAT can only be claimed up until the June VAT return for the previous financial year. This therefore created concern that some VAT on unpaid invoices would be lost and would fall ‘out of year’ as a result of following the normal bad debt provisions (whereby you would repay any VAT claimed on an invoice if the invoice remains unpaid after 6 months. On payment – you would normally be entitled to recovery of this, but the COS rules presented an unusual obstacle).
HMRC have verbally agreed that Trusts should repay any VAT claimed on an invoice if it remains unpaid six months after the due date for payment, but that when payment is made the VAT can be claimed again (subject to the usual rules on COS eligibility) even if the new payment date falls into the next financial year.
This is good news for those Trusts who had concerns about this effecting them and HMRC have confirmed that they will produce a guidance note detailing the correct procedure.