As announced at Budget 2018, HMRC has published draft regulations making changes intended to prevent businesses using ‘regulation 38’ adjustments inappropriately as a means of circumventing the four-year time limit that applies under the error correction provisions.
Where businesses account for retrospective price reductions by making output tax adjustments under reg 38 of the VAT Regulations 1995, the draft regulations will introduce new time limits within which businesses must adjust their VAT returns and send credit notes to customers. The changes are expected to come into force on 1 September 2019.
Reg 38 imposes no time limit, so it is possible for a business to reduce the value of a supply several years after it was made. HMRC has evidence that some businesses are attempting to use reg 38 to make adjustments to their output tax even when no refund is given to the customer. In such situations, the error correction provisions should be applied, which are subject to a four-year time limit.
HMRC invites comments on the draft regulations by 15 April 2019. A tax information and impact note has also been published alongside the draft regulations. See bit.ly/2UK4QTn.
As announced at Budget 2018, HMRC has published draft regulations making changes intended to prevent businesses using ‘regulation 38’ adjustments inappropriately as a means of circumventing the four-year time limit that applies under the error correction provisions.
Where businesses account for retrospective price reductions by making output tax adjustments under reg 38 of the VAT Regulations 1995, the draft regulations will introduce new time limits within which businesses must adjust their VAT returns and send credit notes to customers. The changes are expected to come into force on 1 September 2019.
Reg 38 imposes no time limit, so it is possible for a business to reduce the value of a supply several years after it was made. HMRC has evidence that some businesses are attempting to use reg 38 to make adjustments to their output tax even when no refund is given to the customer. In such situations, the error correction provisions should be applied, which are subject to a four-year time limit.
HMRC invites comments on the draft regulations by 15 April 2019. A tax information and impact note has also been published alongside the draft regulations. See bit.ly/2UK4QTn.
