Businesses to claim over one billion pounds by revisiting restricted VAT claims

According to Adrian Houstoun, VAT specialist at Kingston Smith LLP, “Although HMRC has now made a preliminary announcement, we are waiting for a more detailed statement to clarify the exact situation. However, a new transitional period is likely to be imposed, but will probably be fairly short. We therefore suggest that businesses submit their case as soon as possible.”

In the cases of Fleming and Condé Nast on 23 January 2008, the House of Lords declared that the three year time limit introduced in the UK in 1996 and 1997 without transitional provisions was ineffective. Their Lordships were of the view that the new capping law was incompatible with European Community law and had to be disapplied and that the required transitional period had therefore not yet begun. They said it was up to Parliament or HMRC rather than the Courts to announce the appropriate transitional arrangements.

Houstoun continues, “The announcement follows the much debated issue of the uncapping legislation. Whilst the position is not yet precise, HMRC accepts that input tax claims accrued at 1st May 1997 and output tax claims accrued at 4th December 1996 may now be made.

”Hundreds of claims, many for very substantial amounts, have already been submitted prior to this decision. One example of a potential claim area is where charities did not recover VAT on fundraising costs. Other areas include the non recovery of VAT on share issue costs, the confusion over the status of cultural events, and the recovery of VAT on farm buildings. These are just a few examples however there are many more.”

For further information visit