- UK VAT-registered businesses can only reclaim input VAT that has been correctly charged; wrongly charged VAT is not recoverable from HMRC, even if paid in good faith.
- VAT errors commonly arise on complex supplies such as food, construction, and land-related services, where suppliers may default to charging 20%.
- If HMRC finds an error, businesses may have to repay the VAT plus interest (currently 7.75%) and penalties (typically 15%–30% for careless errors).
- The usual fix is to get a credit note and corrected invoice from the supplier, but interest and penalties often still remain with the customer.
- If the supplier can’t refund the VAT, it may become a permanent cost; recent legal changes have made HMRC restitution claims highly uncertain.
Source: pkf-l.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
