Companies have less than two months to claim sizable VAT refunds

Published at 10:08 AM on 10 February 2009

Companies have until 31 March 2009 to submit VAT refund claims to HM Revenue & Customs (HMRC). They could recover significant amounts of money for input VAT not claimed in the period prior to 1 May 1997 and for output VAT over-declared in the period before 4 December 1996. Such claims can go as far back as 1973 when VAT was first introduced.

Mike Bailey, UK indirect tax leader, PricewaterhouseCoopers LLP, said:

“Virtually every long-standing business could have at least one potential VAT claim and many taxpayers who initially believed they could not make a claim have successfully gone on to do so.

“In the current economic climate, when cash flow is stretched, every business should examine if they have reason to submit a claim. With less than two months to benefit from this one off opportunity, companies must act now.”

In 1996 and 1997 the UK government introduced legislation which meant that any claim for overpaid or under-recovered VAT will have been subject to a three year time limit. However, in January 2008 the House of Lords ruled in the case of Fleming and Condé Nast that the UK’s implementation of the three year capping (as it is known) was in breach of European Commission law because no allowance had been made for a transitional period in the UK legislation. Furthermore, the House of Lords said that HMRC had failed to respect the ‘legitimate expectations’ of taxpayers who had could have made a claim before the time limits were introduced.

As a consequence of the House of Lords decision, taxpayers now have a window of opportunity (until 31 March 2009) to submit claims, which could also include additional claims for compound interest.

Notes to Editors:

1. When a company that is registered for VAT buys goods or services from another supplier, VAT is charged on the purchase cost. This is input tax. Similarly, when the company sells its own goods or services it charges its customers VAT at the same rate. This is output tax. 2. It was the House of Lords ruling in the combined case of Fleming (t/a Bodycraft) v HMRC and Condé Nast Publications Limited v HMRC [2008] UKHL 2 that led to the VAT refund opportunity with HMRC. 

For more information contact:

Natasha. Davies
Tax Senior PR manager, PricewaterhouseCoopers LLP 
Tel:020 7212 3343 
Mobile:07709 019 290 

Mike Bailey
Indirect tax leader, PricewaterhouseCoopers LLP 
Tel:020 7804 3254 


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