| Businesses urged to act swiftly on VAT decision |
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| Wednesday, 23 January 2008 | |
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The House of Lord's ruling on overpaid VAT in the Fleming and Condé Nast cases means that firms can reclaim payments going as far back as 1973.
VAT experts at PKF Accountants & business advisers are advising businesses which believe they overpaid VAT at any point between 1973 and 1996 to claim before HM Revenue & Customs slams the door, following today’s ruling by the House of Lords in the Fleming and Condé Nast cases. PKF VAT partner Gerry Myton believes that there could be a six month window of opportunity to submit a claim as the Lords ruled that it would be lawful for HMRC to introduce a prospective cut-off ‘with adequate warning for claims’. Cases are expected to cost the Treasury as much as £1 billion in claims and interest, and the processing of them to be an administrative nightmare. Myton says that the ruling is hugely significant, as overpayments of VAT before the introduction of the three year cap on 4 December 1996 - or 1 May 1997 for certain claims - are still live. He adds that it is not too late for businesses to check their records and submit claims. For tax overpaid after December 1996 or 1 May 1997 in some cases the three year cap will apply so claims can only be made within 3 years of the overpayment. VAT was introduced in 1973, so Myton says that there are potential claims going back that far to be made. The only issue is whether calculations will be made on a compound basis as that will significantly increase the sums payable. “Given HMRC’s attitude to this over the years, businesses should be entitled to compound rather than simple interest but it may be necessary to go back to court to get that principle established,” Myton adds. He currently has a number of clients who are taking legal action before the VAT and Duties Tribunal on that point. Wednesday’s judgement concludes a battle which began nearly 12 years ago when HMRC announced that claims for overpaid VAT, including claims which had already arisen, would only be met if submitted within three years of the overpayment. This instantly cut off the taxpayers’ rights to reclaim VAT overpaid back as far as 1973. This spawned litigation which went from the tribunal all the way to the European Court of Justice involving Marks and Spencer and further litigation involving other taxpayers which concluded with today’s judgment from the House of Lords. Related articles Related links |
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