PKF warns VAT claims could cost Treasury up to £1 billion
VAT experts at Accountants & business advisers PKF East Anglia are warning businesses they need to act quickly if they think they have overpaid VAT between 1973 and 1996.
Their advice comes following this week's ruling by the House of Lords that overturned the three-year time limit for VAT claims, but which also indicated that HM Revenue & Customs (HMRC) could introduce a cut-off date for claims if they first include a transitional period.
Peter Harrup, Tax Partner at PKF East Anglia, which has offices in Norwich, Great Yarmouth and Ipswich, believes there could be a six-month window of opportunity for businesses to submit their claims - which is considered a reasonable transitional period. This could result in costs to the Treasury of up to £1 billion in claims and interest.
"Overpayments of VAT before the introduction of the three-year cap are still live, so it's not too late for businesses to check their records and submit claims," he says.
VAT was introduced in 1973 so potentially claims could go back that far. "Given HMRC's attitude to this over the years, businesses should be entitled to compound rather than simple interest on their claims but it may take a court case to get that principle established," says Mr Harrup.
The Lords' judgment ends a battle which began nearly 12 years ago when HMRC announced that claims for overpaid VAT, including claims which had already arisen, would only be met if submitted within three years of the overpayment.