What exactly does the new rule say?

If you do not pay a supplier's invoice within 6 months after its due date, you must repay the VAT deduction previously claimed. For example, an invoice due on 15 January must be paid by 31 July. If it remains unpaid then, the VAT deduction must be repaid. In this example, a monthly VAT payer would repay the VAT in the July VAT return, and a quarterly payer in the third-quarter return. 

Does the rule apply to all liabilities?

Apply the rule to invoices for:

  • liabilities to VAT payers (ordinary invoices with VAT),
  • transactions under the reverse-charge mechanism (invoices for building work),
  • liabilities from the EU or abroad (invoices for various software and apps),

It therefore does not apply to liabilities to non-VAT payers or private individuals. Which is logical: there is nothing to repay. 😊

What if you eventually pay the invoice?

The good news is that, if you pay later, you can claim the VAT again (a “correction of the correction”).

Practical impact on small VAT payers

This change introduces an entirely new record-keeping obligation for all VAT payers, including small sole traders. Until now, we kept liability records for some self-employed clients only once a year, mainly because of the obligation to repay VAT if they ceased to be VAT payers. That situation also requires repayment of VAT on overdue liabilities; we covered it in more detail here.  

It will now be necessary to maintain ongoing records of supplier invoices, monitor their due dates and, above all, payment dates. Otherwise, we risk failing to spot unpaid invoices in time.

Set up a simple, practical system so that no payment slips through. For invoices you know will remain overdue for more than 6 months, factor repayment of VAT already claimed into your cash flow. 

As always, we are here to cut through the accounting and tax jungle alongside you! Do not hesitate to contact us. 😊