The Value Added Tax (Amendment) Regulations, SI 2019/1048, amend the rules on output tax adjustments for retrospective price reductions with effect from 1 September 2019.
Businesses will only be able to make adjustments where they have made actual refunds of money to customers. The regulations introduce a new 14-day time limit for issuing credit notes and specify that VAT adjustments must be made in the accounting period in which the price change occurs.
The government announced the change at Budget 2018. The current ‘regulation 38’ provision imposes no time limit on adjustments and HMRC was concerned that some businesses were using the provision to adjust their output tax even where no refunds were given to customers, and to circumvent the 4-year time limit.
HMRC consulted on a draft of the regulations during March and April 2019. Revisions following consultation include making the format of the required documents more flexible.
The Value Added Tax (Amendment) Regulations, SI 2019/1048, amend the rules on output tax adjustments for retrospective price reductions with effect from 1 September 2019.
Businesses will only be able to make adjustments where they have made actual refunds of money to customers. The regulations introduce a new 14-day time limit for issuing credit notes and specify that VAT adjustments must be made in the accounting period in which the price change occurs.
The government announced the change at Budget 2018. The current ‘regulation 38’ provision imposes no time limit on adjustments and HMRC was concerned that some businesses were using the provision to adjust their output tax even where no refunds were given to customers, and to circumvent the 4-year time limit.
HMRC consulted on a draft of the regulations during March and April 2019. Revisions following consultation include making the format of the required documents more flexible.
