VAT decision could see millions of overpaid tax returned to charities
Howard Lake | 24 January 2008 | News
VAT decision could see millions of overpaid tax returned to charities
– charities urged to act swiftly before HMRC slams the door shut –
24 January 2008: VAT experts at PKF Accountants & business advisers are advising charities which believe they overpaid VAT at any point between 1973 and 1996 to consult their tax advisers and claim before HM Revenue & Customs slams the door, following Wednesday’s (23.01.08) ruling by the House of Lords in the Fleming and Conde Nast cases.
PKF VAT partner Gerry Myton believes that there could be a six month window of opportunity to submit a claim as the Lords ruled that it would be lawful for HMRC to introduce a prospective cut-off ‘with adequate warning for claims’. Cases are expected to cost the Treasury as much as £1 billion in claims and interest, with the charity sector potentially a major beneficiary.
Gerry says, “This ruling is hugely significant; overpayments of VAT before the introduction of the three year cap on 4 December 1996 (or 1 May 1997 for certain claims) are still live, so it is not too late for charities to check their records and submit claims. For tax overpaid after December 1996 (or 1 May 1997 in some cases) the three year cap will apply so claims can only be made within 3 years of the overpayment.
“VAT was introduced in 1973, so there are potential claims going back that far to be made. The only issue is whether calculations will be made on a compound basis as that will significantly increase the sums payable.
“Given HMRC’s attitude to this over the years, charities should be entitled to compound rather than simple interest but it may be necessary to go back to court to get that principle established. Currently I have a number of business clients who are taking legal action before the VAT and Duties Tribunal on that point and I’m talking to a number of charities.
“Any charity which thinks it may have overpaid VAT should consult its tax advisers as early as possible. HMRC will undoubtedly move to close this window as soon as possible and given that this is a 23 year period, there will be a great deal of paperwork that needs to be examined”, Gerry concludes.
The judgment concludes 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 3 years of the overpayment. This instantly cut off the taxpayers’ rights to reclaim VAT overpaid back as far as 1973.
This spawned litigation which went from the tribunal all the way to the European Court of Justice involving Marks and Spencer and further litigation involving other taxpayers which concluded with today’s judgment from the House of Lords.
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Notes to Editors:
1. PKF is a leading firm of accountants and business advisers with more than 1,800 partners and staff operating in 23 offices in the UK mainland firm, a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk.
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member of PKF International which is an association of legally independent firms with more than 14,650 people operating in 119 countries around the world.
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.