HMRC Tightens the Reins on Input VAT Refunds with Increased Scrutiny

November 27, 2025 Global VAT Updates

In recent months, HMRC has signalled a more stringent approach to input VAT claims and refunds. Recent guidance clarifies when late claims will be accepted and highlights the importance of careful documentation, while our experience as a VAT-specialist business indicates an increase in audits and targeted checks on VAT claims.

Key Points from HMRC Guidance

HMRC’s updated guidance emphasises that late claims for input tax will only be allowed in specific circumstances. Acceptable reasons include delays due to internal accounting processes or invoice-processing cut-off dates. However, HMRC will not permit late claims where there is evidence of carelessness or repeated late submissions.

Key elements of the guidance include:

  • Late claims remain subject to the standard four-year limit from the relevant VAT return period.
  • Claims must be well-documented, including VAT invoices, a clear explanation for the late claim, and a period-by-period breakdown of the amounts claimed.
  • HMRC may offset other outstanding VAT liabilities against late claims.
  • “Careless errors” identified by HMRC require formal disclosure; failure to do so may result in penalties of up to 30% of the understated VAT.

This guidance reinforces the need for robust internal processes, accurate record-keeping, and timely claims to mitigate the risk of penalties or rejected claims.

Observations from Meridian’s recent practical experience

Meridian has observed a clear rise in HMRC scrutiny of VAT Audits and checks on input VAT refunds in the last number of months. Refunds are increasingly subject to more checks, and late or retrospective adjustments are being examined closely, with a focus on the completeness and accuracy of supporting documentation.

This trend underscores the importance for businesses to ensure that input VAT claims are timely, well-documented, and defensible in the event of an audit or targeted HMRC review.

Practical Steps for Businesses

Given these developments, businesses should consider:

  • Reviewing internal processes to ensure timely and accurate input VAT recording.
  • Ensuring robust documentation for all claims, including invoices, internal approvals, and calculation notes.
  • Monitoring exposure to late claims and considering proactive error disclosure where appropriate.
  • Strengthening VAT determination to ensure transactions are treated correctly first time.
  • Ensuring master data is accurate and up to date, reducing the risk of systematic VAT errors.
  • Engaging VAT specialists to review high-value or complex refund claims and to assist with audits or HMRC inquiries.
 Conclusion

The combination of HMRC’s updated guidance and the recent increase in audits highlights a clear trend in that input VAT refunds and VAT processes are under closer scrutiny than ever.

Businesses must remain vigilant, maintain meticulous records, and ensure that all claims are properly justified to reduce exposure to penalties, interest, or refund clawbacks.

As a dedicated VAT consulting and compliance firm, we can review your input VAT position, strengthen documentation, and support you through HMRC audits or enquiries.

 

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