17 February 2009
Businesses should revisit VAT returns between 1973 and 1997 and claim for any VAT they are owed by March 31 2009 before the window closes for good and the three-year limit on VAT claims comes into force.
The three-year limit on these old VAT claims will take effect from April 1 2009, shutting off any opportunity for businesses to recover VAT from the period 1973 to 1997 which they are currently entitled to.
Businesses commonly overpay or fail to recover all of the VAT to which they are entitled from HM Revenue & Customs (HMRC) and often do not realise until decades later. It is estimated that HMRC may have to repay £1 billion of VAT in respect of these claims.
The VAT claims it is preparing on behalf of clients are worth significant sums of money.
Simon Newark, VAT partner in our London office, comments: “A huge number of businesses will be eligible to claim for VAT as far back as 1973 and some of these claims will be for millions of pounds before we even start to look at claims for interest as well.”
“With the window of opportunity rapidly closing, businesses now need to act quickly as preparing claims can take some time. Every business that paid VAT between 1973 and 1996 should look at old VAT returns and think about whether they might be owed money.”
“For businesses hard-pressed by the recession, these VAT claims could provide a welcome boost to cashflow.”
The three-year limit on VAT claims was introduced in 1996/7, but the House of Lords followed decisions by the European Court and ruled that it was unlawful as the UK Government had not allowed for a transition period in which businesses could make claims dating back to the introduction of VAT in 1973.
Following the recent decision by HMRC to pay 0% interest on current overpaid tax which it refunds to taxpayers, businesses in general should now be more vigilant about bringing claims for overpaid tax as quickly as possible.
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