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Six Month VAT Adjustments – Are You Making Yours?

Indirect Tax Matters - January 2023

Taxpayers are normally required to make a VAT adjustment where they have reclaimed VAT charged on purchases where they have not paid the vendor within 6 months of deducting the VAT. This concept is known as the “Six months adjustment rule”.

Finance Act 2013 introduced this treatment. From 1 January 2014 Section 62A of the VATA 2010 obliges the taxpayer to adjust the deducted VAT when transactions remained unpaid after 6 months.

How does it work?

When the customer has deducted VAT in a taxable period but did not pay the supplier for the related goods or services within 6 months of the end of that taxable period, the customer must adjust the amount of VAT input credit originally claimed in the third taxable period following the period in which the tax was deducted. For example, if the VAT related to the original transaction was deducted in the January/February VAT return and consideration has not been paid by the last day of the 6th month following the initial period (i.e. by 31 August), the adjustment of tax deductible should be made in the July/August VAT return.

Where the consideration is subsequently paid in full or in part after the adjustment has been made, a corresponding re-adjustment is permitted in the period in which the full or partial consideration was paid.

Existing exceptions

Section 62A(3) VATA 2010 mentions that there must be reasonable grounds not to apply the adjustment rule. The taxpayer therefore does not have an obligation to make an adjustment in their VAT return if there are reasonable grounds not to do so. The legislation does not provide a definition of what constitutes reasonable grounds; however, Revenue have issued some guidance. There is no decisive position, but rather an individual analysis regarding the circumstances of each case should take place. The taxpayer who makes no adjustment should be in a position to demonstrate that there is a genuine commercial reason for not to pay the supplier. Three aspects are worth mentioning:

  • The inability to pay is never considered by Revenue to be a reasonable ground.
  • In respect of an arm’s length transaction, when a credit term agreed between the parties for genuine commercial reasons exceeds 6 months, then the adjustment by the customer may not be required.
  • Where an accountable person has not paid the consideration or part of the consideration for a supply of goods or services because of a dispute, and he has enough evidence proving that there is a legal process resolving the matter, then the adjustment is typically not required.


In Revenue’s view, this rule encourages customers to pay their bills in order to reclaim the VAT charged. The rule also has a positive impact on Revenue’s position as well. Before this rule existed, Revenue could not insist that taxpayers adjust their VAT position where an input credit was claimed but the supplier of the goods/services had not yet been paid. The rule allows Revenue to recover the VAT element back from taxpayers who have not paid their debts within the timeframe.

The six-month adjustment requirement is now a regular feature of Revenue level 1 and 2 interventions.


Taxpayers who have not paid their debts within six months should consider the application of Section 62A VATA 2010 and whether adjustments are required to their VAT returns to minimise the risk that Revenue may impose penalties/interest if the adjustment is not made in time.

If any queries on this article’s contents or would like our assistance with dealing with any taxation matter, please contact Mattia Piol or any of our team.

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