The four year cap on VAT claims

Most VAT claims are capped at four years, but the clock starts at different points. A claim for output tax you overdeclared must be made within four years of the end of the period in which you overdeclared it (section 80 of the VAT Act 1994), while input tax you failed to claim can be recovered for up to four years after the due date of the return on which you were first entitled to claim it (regulation 29 of the VAT Regulations 1995). HMRC can also refuse an output tax refund if paying it would unjustly enrich you.

Which claims does the four year cap cover?

HMRC’s VAT Refunds manual (VRM8100) lists the time limits. The main ones are:

Type of claim	Law	Four years runs from
Output tax overdeclared on a return	Section 80(1)	End of the accounting period of the overdeclaration
Output tax wrongly disclosed as underdeclared	Section 80(1) and (4ZA)(b)	End of the period in which the disclosure was made
Output tax in an assessment that should not have been made	Section 80(1A)	End of the period in which the assessment was made
Other amounts paid that were not VAT due	Section 80(1B)	Date the payment was made
Input tax not claimed on time	Regulation 29(1A)	Due date of the return for the first period of entitlement
VAT incurred before registration	Regulation 111(3B)	Due date of the first return the business was required to make

Section 80(7) makes section 80 the only route for recovering VAT paid that was not due, so a claim outside these limits fails however clear the mistake. VRM8100 also notes that bad debt relief has its own limit of four years and six months.

Why does input tax run from a later date than output tax?

For overdeclared output tax the four years start at the end of the period. For input tax, regulation 29(1A) prevents HMRC from allowing a claim more than four years after the date by which the return for the first period of entitlement had to be made. The online filing deadline is usually one calendar month and seven days after the period ends, so an input tax claim normally has slightly longer.

The first period of entitlement is not always the period of the invoice. Regulation 29(1) says input tax is claimed for the period in which the VAT became chargeable, but where you did not then hold the VAT invoice, you claim in the first period in which you do hold it. VAT Notice 700, paragraph 10.5, says the same. Failing to claim in that period is an error, so the claim then has to be made through the error correction process.

Does the four year limit work both ways?

Broadly, yes. Notice 700 says HMRC does not make assessments more than four years after the end of the relevant period unless there are special circumstances such as fraud, where the limit is 20 years. VAT Notice 700/45, paragraph 4.7, sets the same four year limit for correcting errors and adds two exceptions:

• Tax point errors. Where VAT was declared on the return immediately before or after the correct one, the correction is allowed provided the later return is within the four year limit.
• Deliberate errors. The four year limit does not apply to them.

How an error is corrected, whether on the next return or by a separate notification, depends on its size and is explained in correcting VAT errors. The time limit decides whether you can claim at all.

How does this work in practice?

Illustration only. A business using calendar quarters finds in November 2026 that it has charged VAT on a zero rated product since 2021.

• Overdeclared output tax for the quarter ended 30 September 2022 had to be claimed by 30 September 2026, so that quarter is now out of time.
• The quarter ended 31 December 2022 can be claimed until 31 December 2026, and every later quarter is in time.

The same business also finds a purchase invoice for the quarter ended 31 December 2022 that was never claimed. That return was due on 7 February 2023, so the input tax can be claimed until 7 February 2027. Claims should be made promptly, because each month of delay can take another period out of time.

What is unjust enrichment?

Section 80(3) makes it a defence to a claim under section 80(1) or (1A) that crediting the amount would unjustly enrich the claimant. It applies to overdeclared output tax, not to input tax claims. Notice 700/45, section 9, describes it as someone benefiting from a refund when their customer bore the cost of the VAT wrongly charged.

VRM12100 says HMRC can use the defence where the claimant has passed on the burden of the VAT, cannot or will not reimburse the person who bore it, and has not suffered loss or damage from mistaken assumptions about VAT. There is no statutory definition, so HMRC relies on case law.

How does HMRC decide whether the VAT was passed on?

It is a question of fact about who really bore the cost. VRM12100 says it cannot be answered from contracts or invoices showing VAT separately; it usually needs some economic analysis, although the Court of Appeal in Baines & Ernst said this depends on the facts. VRM12200 sets out HMRC’s approach:

• Where the customer could recover the VAT as input tax, HMRC assumes it was passed on.
• Where customers could not recover it, the starting assumption in a free market is that the supplier absorbed the cost to stay competitive. HMRC has to overturn that with economic evidence, and the burden of proof is on HMRC.
• Comparing prices before and after a change is not conclusive. Two businesses charging the same price after registration may have passed on the VAT in one case and absorbed it in the other.
• Where VAT was only partly passed on, HMRC can refuse part of the claim and pay the rest.

Even where VAT was passed on, sections 80(3B) and (3C) allow the claimant to show quantified loss or damage, such as lost sales, caused by the mistaken assumption. VRM12300 says the loss must have a direct causal link to the pass on, and the claim can never be increased above the VAT overpaid.

Can you still get the money if you repay your customers?

Yes. HMRC will not refuse a claim on unjust enrichment grounds if you agree to reimburse your customers under its reimbursement scheme (section 80A and regulations 43A to 43G). Notice 700/45, section 9.2, requires you to:

• sign the undertaking in section 10 of the notice, which cannot be amended
• refund customers within 90 days and pass on any interest received
• repay any amount not refunded to HMRC within 14 days after the 90 days, without a reminder
• keep records of names, addresses, amounts, interest and dates
• not deduct your administration costs from the refunds

The scheme cannot be used where the customer was VAT registered and recovered the overcharged VAT as input tax. It can be used after you have deregistered.

What mistakes come up most often?

• Assuming the four years run from the date the error was discovered.
• Using the period end for an input tax claim and giving up a claim that was still in time, or the reverse.
• Treating invoices that show VAT as proof that it was not absorbed.
• Holding back an output tax claim while customers are identified, letting early periods fall out of time.
• Forgetting the separate limit on VAT incurred before registration.

A large claim often leads to HMRC checks before payment, covered in HMRC VAT compliance checks.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• How VAT works: output tax and input tax
• Penalties for errors on VAT returns
• VAT repayment supplement
• Credit notes, discounts and VAT
• Reclaiming VAT without a valid invoice

Sources

• legislation.gov.uk: Act 1994 c. 23, section 80
• GOV.UK: Manual page VRM8100
• GOV.UK: Manual page VRM8200
• legislation.gov.uk: SI 1995/2518, regulation 29
• legislation.gov.uk: SI 1995/2518, regulation 111
• GOV.UK: Submit vat return
• GOV.UK: Vat guide notice 700
• GOV.UK: How to correct vat errors and make adjustments or claims vat notice 70
• GOV.UK: Manual page VRM12100
• GOV.UK: Manual page VRM12200

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.