VAT claims could generate hefty fees from up to £1bn of rebates
Accountancy Age, 31 Jan 2008
Advisers could earn a significant chunk of a £1bn VAT reclaim by hundreds of companies, after publishers Condé Nast won a major victory in the House of Lords.
‘This litigation has been running for many years. The decision will be welcomed by the many professional advisers who took a stake in the outcome of the case by agreeing contingency fees for processing taxpayers’ claims, ‘ said Jason Collins, partner at McGrigors.
‘This fee income will provide a welcome windfall at a time when the prospects
for professional services in the short term are looking uncertain,’ he added.
The government tried to introduce a transitional period for tax claims after it
had lost in the courts against Marks and Spencer for attempting to introduce a
time limit on claims.
HM Revenue & Customs then sought to introduce a transitional period in the form of issuing ‘business briefs’ to stop claims going back further than 1996.
The courts decided that the transitional period was not effective for input tax claimants and that the taxpayer could make claims as far back as 1973, when the UK entered the European Common Market.
Experts suggested that output tax claimants, who were specifically targeted under the original ‘business brief’ transitional period, might also be able to make claims under the ruling, as the judges pointed towards the period’s unlawfulness.
‘The fight may not end here, however many taxpayers will look to be compensated with full commercial rates of interest calculated on a compound basis, rather than the low simple rate of interest provided for under statute. Given the age of the claims, compounding could result in an interest award more than five times greater than the tax itself,’ said Chris Morgan, head of KPMG’s international tax group.
He added that the decision would force the taxman to introduce a reasonable time period for claims occurring between 1973 and 2003. ‘I would expect at least a six-month period,’ said Morgan.
Tony McClenaghan, head of indirect tax at Deloitte, which acted for Condé Nast, said: ‘The successful culmination of the litigation means that CNP will finally receive the VAT which it is lawfully entitled to and clearly this ruling has implications for other businesses.’
HMRC said that the three-year time limit for VAT claims still applies to tax periods starting on or after 1 May 1997.
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