V3.519 Tax overstated

Tax may be overcharged on an invoice for many reasons. For example, the supply may have been charged to tax at the incorrect rate; the tax due may be incorrectly calculated; the value of the supply may be reduced to a lower amount with a corresponding effect on the tax chargeable; or the rate of VAT may have been reduced in circumstances which permit the supplier to adjust the amount of tax chargeable1. In each case the consideration evidenced by the VAT invoice will be higher than it should be and a lower amount is properly receivable from the customer. The time limit which applied to the adjustment of VAT accounts as a result of changes in consideration was removed with effect from 1 April 20092. This amendment was made because the (then) three-year cap in respect of changes in consideration had the effect of denying taxable persons their directly effective Community law rights to be taxed on the consideration received and no more (and therefore, by implication, no less). In GMAC3, it was held that a time limit should not prevent adjustment before the first opportunity to make it arises. This decision was followed in Carlton Clubs4, where the Tribunal held that a decision by HMRC to change the method by which income from bingo games was calculated gave rise to a change in consideration, and fell within the scope of reg 38, rather than VATA 1994, s 80 (refund of overpaid tax – see V5.159B–V5.159C).

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