55-355 Repayment by issue of a credit note: Reg 38 vs s. 80
s. 80 of VATA gives taxpayers the right to recover overpaid output VAT provided that a) their claim is made within four year of the end of the VAT return period in which the error occurred (s. 80(ZA)) and b) they are not unjustly enriched.
Reg. 38 of The VAT Regulations 1995 (SI 1995/2518) requires taxpayers to adjust their output tax if there is a change in the consideration received for a supply (whether that is an increase or decrease). Adjustments under Reg. 38 are not subject to a cap.
Because there is no time limit on a Reg. 38 claim, taxpayers often attempt to argue that claims for overpaid output tax arise due to a change in consideration, not as a result of an error or mistake.