If you have had VAT claims restricted to only three years, or have refrained from making a claim believing that you were out of time, as a result of a recent case you may be able to revisit your claim. A new transitional period is likely to be imposed, but will probably be fairly short so your prompt attention to the matter is therefore recommended.

On 23rd January 2008 the House of Lords issued its opinion in the cases of Fleming and Conde Nast. As expected, the Lords said that the three year time limit introduced in the UK in 1996 and 1997 without transitional provisions was ineffective. In recent years there has been much legal debate over the introduction of the uncapping legislation. However it is fair to say that the position on under claimed input tax is relatively clear but that on overpaid output tax much less so, and in any event Customs have not yet commented on the case.

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 that it was up to Parliament or HMRC to announce the appropriate transitional arrangements.

Hundreds of claims, many for very substantial amounts, have already been submitted prior to this decision.  It has been suggested that this will cost the Exchequer over one billion pounds.  One example of a potential claim area is where charities did not recover VAT on fundraising costs but following the 2005 Children’s Society case could recover a proportion of it. 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.

If you have been involved in a capped claim and wish to discuss the implications of this case please contact either your usual Kingston Smith LLP contact or VAT specialist Adrian Houstoun on 020 7566 3802.