HM Revenue and Customs received another blow recently when the House of Lords dismissed their appeals in the lead cases regarding the VAT three year capping legislation.
The cases, Fleming t/a Bodycraft and Condé Nast Publications, publishers of Vogue and Vanity Fair, argued that the way in which HMRC introduced the capping legislation did not comply with European Law as it did not allow taxpayers a reasonable amount of time to submit existing claims for input tax incurred before the legislation took effect.
The European Court of Justice had previously found in a separate case that the tax authorities were entitled to introduce a cap. However, introducing capping legislation without providing a period in which taxpayers could exercise existing rights contravened EU law principles. The Law Lords decided, unanimously in the case of Fleming and 4-1 in the case of Condé Nast Publications, to uphold the Court of Appeals’ decisions in favour of the taxpayers.
HMRC were criticised for not providing a clear transitional period in law and in which taxpayers knew they had the right to submit claims which would, after this period expired, be capped. One of the Law Lords commented that “if you know the time of the last bus or tube, you are in a much better position to organise your evening than if you do not know when public transport stops”.
The consensus among the Law Lords was that those taxpayers who have unclaimed input VAT incurred before 1 May 1997, when capping legislation was introduced, still have the right to claim and that a prospective transitional period must now be written into the law. It is expected that this transitional period is likely to be 6 months.
Says Robert Plumbly, Head of PEM VAT Services, “We await HMRC’s view on this case and their opinion of the validity of claims in the light of the decision. It is now important that businesses that have submitted claims in the past or may now have claims to submit do not miss the opportunity to obtain their repayment from HMRC.”
Robert continues, “PEM VAT Services has a proven record of negotiation with HRMC to obtain refunds for our clients, having already obtained VAT related refunds for many of our clients including a refund in excess of £4,000,000.”
If you think you may have entitlement to unclaimed VAT and need any further advice on the subject please contact PEM VAT Services on 01223 728 222 and one of our specialist advisers will assist you.
Date:30 January 2008
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