Commentary

V3.450 Consideration not paid within six months

Part V3 Supplies, acquisitions and imports

V3.450 Consideration not paid within six months

V3.450 Consideration not paid within six months

Introduction

VATA 1994 s 26A1 introduced, from 1 January 2003, a provision that a person ceases to be entitled to input tax credit at the end of a six-month period2 beginning with the “relevant date” if, at the end of that period, the consideration (or any part of it) for the supply in question remains unpaid. The “relevant date” means the date of the supply or, if later, the date on which the sum became payable. HMRC may, by regulations, make supplementary, incidental, consequential or transitional provisions as they consider necessary. In particular, such regulations may provide3

  1.  

    (i)     for the restoration of entitlement to input tax credit where payment is subsequently made;

  2.  

    (ii)     for ascertaining whether anything paid is to be taken as paid by way of consideration; and

  3.  

    (iii)     for particular cases, such as part payments and mutual debts.

Regulations4 were introduced with effect from 1 January 2003. These regulations set out, inter alia, the means by which the input tax to which the person has ceased to be entitled is to be repaid to HMRC, and the means by which the restoration of such entitlement is to be applied.

Restriction of input tax

Where a person—

  1.  

    (a)     has not paid the whole or any part of the consideration for a supply within six months of the time of supply, or (if later) the date on which such payment became due, and

  2.  

    (b)     has claimed all or part of the VAT on the supply

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