The delays follow a Court of Appeal ruling that the introduction of the three-year limitation on claims for overpaid VAT prior to 1997 was unlawful, as there was not an adequate period of transition in the new regime.

HM Revenue & Customs invited claims for repayments in August last year, but, according to Baker Tilly, only a handful of the 800 claims made to date have been processed because only two officers were originally appointed to process the claims.

The number of staff allocated to the task has since been increased to four, but advisers remain frustrated that more staff were not called in to process the claims, as it was obvious that the hundreds of businesses would seek VAT repayments.

The cases, which involved companies such as Condé Nast, have been dragging on for years with car dealers making up many of the claims.

Steve Hodgetts, head of VAT at Baker Tilly, said: ‘The average claim is likely to be around the £1m mark, so HMRC could be facing repayments of anywhere between £500m and £1bn. There are a lot of demons out there for HMRC.’

According to Baker Tilly there are businesses that made claims for overpaid VAT in August and September last year, but have yet to receive an acknowledgment of their claim, let alone a refund.

‘It cannot be right that, having succeeded at the Court of Appeal in arguing that the three-year cap was unlawfully introduced, traders are now being prevented from receiving VAT due to them by a shortage of staff at HMRC,’ Hodgetts said.

Responding to the criticism, HMRC said that while it regretted delays to repayments, it believed that it had provided ‘proportionate’ resources to manage the claims.

‘Assuring the accuracy of claims, that often cover many years, can be made difficult by the absence of detailed business records for early years. HMRC is committed to improving customer service, but we also have a duty to the wider taxpayer to ensure that amounts claimed are supported by evidence,’ HMRC said in a statement.