Question: My client is a retired solicitor who deregistered from VAT five years ago. He has been in touch to advise he has received an invoice from a barrister who was working on a case for him before he retired. Apparently, the case has recently been decided and under the agreement they had, the barrister has now invoiced for her fees. Is my client able to claim the VAT element or is it now too late as it is capped?

Answer: You are correct in your understanding that late claims for input tax are restricted to four years from the due date of the return in question (Regulation 29 VAT General Regulations SI 1995/2518).

The entitlement to make a claim to deduct input tax arises in the accounting period in which the taxable person has both incurred the input tax and received the documentary evidence, for example, the VAT invoice, to support its deduction.

The taxable person has four years from the due date of the return for the accounting period in which the entitlement to make the claim to deduct arose, in which to make a late claim for input tax.

However, in your client’s case there has been no error and no late claim. This is because the evidence, in the form of the barrister’s invoice, has only just been issued and received. 

As such, provision exists for businesses to recover VAT post-deregistration, provided the services have been incurred in connection with a taxable business activity carried on during the period of registration.

Claimants should complete a VAT 427 form, available on the HMRC website.

Although as a former solicitor, your client is likely to have been fully taxable, it should be borne in mind that if the business was subject to some restriction in terms of input tax recovery, for example partial exemption, then the relevant recovery rate should be applied.

About the author

Sally Atkins is a VAT advice consultant at nbsp;Croner Taxwise advice lines Tel: 0844 892 2470. 

This article first appeared in Tax Question of the Week by Croner Taxwise