If you charge a customer VAT and subsequently discover that the supply of goods or services was exempt, zero rated or outside the scope of VAT you can make a claim to HMRC to refund the VAT overcharged.
The phrase “unjust enrichment” means that you are required by HMRC to refund any VAT repaid to you in this way to your customers, you cannot keep the refund for yourself!
HMRC have a special reimbursement scheme that deals with claims for repayment. When making a claim you will have to agree to:
- Sign a formal undertaking that you will comply with the terms of the reimbursement.
- Make all refunds to your customers within 90 days.
- Repay any residual amounts not returned to customers within 14 days of the 90 day time limit.
- Pass on any statutory interest paid with the refunds to your customers.
Additionally you will have to keep the following records:
- Names and addresses of the customers you intend to reimburse.
- Total amount paid to each customer.
- Amount of interest paid to each customer.
- Date you refunded the money.
HMRC will also seek to reduce refunds due if the supply resulted in a claim for associated VAT input tax. For example if you supplied services at standard rate and there were associated costs where you recovered input tax, and then you discovered that the supply should have been an exempt supply, then HMRC would reduce the refund of over-declared output tax by the over-claimed, associated, input tax.
If you need to make a claim under the reimbursement scheme you will need to submit a formal undertaking in writing. Please contact us and we will organise this for you.