Value Added Tax Act 1994 section 25

Payment by reference to accounting periods and credit for input tax against output tax

Section 25 establishes how taxable persons account for VAT within prescribed accounting periods, including how input tax credits are set against output tax and when HMRC must pay or may withhold VAT credits.

• Taxable persons must account for and pay VAT on their supplies by reference to prescribed accounting periods, in the manner and at the times set out in regulations
• At the end of each accounting period, a taxable person may deduct allowable input tax from output tax due, and where input tax exceeds output tax (or no output tax is due) HMRC must pay the difference as a "VAT credit"
• HMRC may withhold payment of a VAT credit where the taxable person has outstanding returns for earlier periods, and may also allow all or part of a credit to be carried forward to a later period
• The Treasury may by order exclude VAT on specified supplies or importations from input tax credit, and such orders may also grant consequential relief from output tax