Ruling on 3 year cap for VAT claims clarified
HMRC have issued new guidance that will affect taxpayers who have made or were considering claims to recover VAT in respect of earlier years and were affected by the ‘capping’ legislation.
Revenue & Customs Brief 41/09 follows a recent (unreported) judgment by the Scottish Court of Session. This related to a 2006 decision of the VAT Tribunal that the introduction of the three-year time limit for making VAT claims without a transitional period in 1996 had never been lawfully enacted. The recent judgment effectively reverses the earlier decision.
This case is relevant to taxpayers who sought to make claims on the basis that the capping legislation was wholly invalid. The Court of Session has now closed the door to these type of claims on the basis that the legislation was valid and the retrospective right to claim for transitional relief has now passed. The deadline for transitional ‘Fleming’ type claims was 31 March 2009.
There will be no application for leave to appeal to the House of Lords. Taxpayers who have submitted post-Fleming claims should now consider whether they wish to withdraw their appeal or proceed to a full hearing.
All VAT claims are now capped at the shorter of four years or back to 1 April 2006.