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Delays in receiving a VAT refund from HMRC can and do occur. What’s the best way to avoid delay?

When a registered company submits its VAT return, there will sometimes be a refund due. This occurs when the business has paid out more in VAT in the qualifying period than it has received. When this happens, the business obviously wants its money back as quickly as possible. However, there are sometimes hold ups, and these can, on occasion, have serious repercussions for the company concerned.

The most obvious impact is on the cashflow of the business. If the refund is substantial, unexpected problems in getting the refund can cause serious damage to the liquidity and trading capability of business.

Delays do occur, so what should you do to avoid them?

A common reason for a delay is that the VAT return has prompted an investigation by HMRC and the refund will not be paid until that investigation is complete to the satisfaction of the VAT inspectorate.

There are several issues which might trigger an investigation:

When the VAT return is submitted, HMRC has 30 days to make any enquiries before they process the return and send any repayment due. HMRC will probably launch an enquiry if the repayment due is especially high, or if it is the first VAT for that business and shows a repayment due. We advise clients to submit a VAT repayment return as soon as possible, and not wait for the actual due date. The 30-day period for HMRC to enquire into your VAT return starts from the day you submit it. So, let’s say your return is due by 7 August for the period ending June 30. If you are anticipating a repayment, then it would be best to submit it at the beginning of July.

Of course, it is also extremely important that a business should make sure that the VAT return is correct and accurate in all aspects. An error in the return stops the 30-day clock, because HMRC will not process the return until it is satisfied that the return is right.

In addition, we always advise that a return which is making a substantial claim for repayment is submitted along with evidence to support the repayment claim. If the claimed VAT repayment is high, or higher than usual, there is a good chance of its being queried. For our clients, when we submit the VAT return, we send evidence for the amounts with copies of VAT invoices and the reason for the claim to pre-empt enquiries. Then, HMRC can see that evidence for your repayment has been provided which is often sufficient to obviate any enquiry.

New businesses are especially vulnerable.

New start ups will often find themselves claiming a VAT refund simply because of set up costs such as property purchase (an extremely problematical issue) on investment in fixtures, fittings and equipment. HMRC will look very closely at these which can cause a delay.

Making sure the claim is 100% accurate, supported by relevant documentation, and submitted as early as possible should help to avoid any hold up in reimbursement.

It is also important, especially for first-timers, to ensure that HMRC has valid bank details to make repayment into your business’s bank account. If there are no UK bank account details available, HMRC issues a payable order which can take ten days to credit your bank account with the repayment.

While cashflow might be the main problem for a business in this situation, it is not the only one: The stress of an HMRC investigation can be onerous, as can penalties levied for erroneous VAT returns. Not to mention that seeking advice incurs professional costs.

VAT is an extremely complex area, both in calculation and submission. It is exactly the reason that Bennett Verby has a team of highly-experienced specialists in-house to make sure our clients pay the right amount of VAT, no more and no less. And always get any refunds in timely fashion.

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