VAT partial exemption – HMRC view on ECJ case
HMRC have published a new Revenue & Customs Brief (43/10) entitled ‘VAT: ‘Italian Republic’ claims for overpaid VAT – partial exemption implications of the ECJ decision in Nordania Finans’.
The brief concerns a review by HMRC of the implications of the ECJ decision in Nordania Finans on claims for output tax over-declared on car sales. The claims in question concerned cases where input tax was blocked on the purchase of the cars. The claims had been originally submitted as a result of an earlier ECJ decision known as the ‘Italian Republic decision’.
The original decision opened the floodgates for a significant number of claims by businesses in the motor trade and centred around the correct VAT treatment involving the sale of demonstrator vehicles, courtesy cars and daily rental vehicles. The claims relate to historic periods and many claims were submitted as part of the ‘Fleming’ facility. The deadline for submitting ‘Fleming’ claims expired on 31 March 2009.
Following a review of the recent ECJ decision known as Nordania Finans, HMRC are now stating that these claims did not take proper account of European case law on partial exemption.
As a result of this decision, HMRC is asking businesses whose claims have not yet been paid to revise their claims to take account of the partial exemption implications. Where claims have already been repaid by HMRC without making adjustment for partial exemption HMRC is issuing recovery assessments subject to the appropriate time limits.