VAT on Aged Payables over 6 months

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21 March 2023

You are required to repay input tax to HMRC if you do not pay the suppliers within 6 months of the due date.

post : Bookkeeping and VAT

If you are on Standard VAT accounting (where you claim back the VAT based on the invoice date rather than the payment date) and have amounts owing to suppliers for more than 6 months, you need to check that you are dealing with the VAT correctly.

If an invoice is unpaid 6 months after the due date (so if payment were due within 30 days, that’s 7 months after the invoice date) then you should adjust the next VAT return to repay to HMRC the VAT that was previously reclaimed. If the invoice is paid later, then the VAT can be reclaimed again.

This is a common target area for HMRC officers when conducting VAT visits as many businesses fail to apply this legislation.

Therefore, each VAT quarter you should check your aged creditors and make any relevant adjustments.

The opposite is also applicable – if you have anyone who owes you money and the invoice is more than 6 months overdue for payment, you can reclaim the VAT on your next return!

For HMRC guidance, please visit the official government website.

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