Input tax claimed in each VAT return is provisional and can be affected by seasonal variations. Therefore, an annual recalculation over the longer period is required and an adjustment for underpaid or overpaid tax. At this point the de minimis calculation also has to be rechecked where appropriate.

The default position is that the annual adjustment is calculated in the first VAT return after the year end. There is though, an option to bring forward the annual adjustment to the last VAT return of the year.

For further information see Chapter 12 of HMRC VAT Notice 706: Partial Exemption.