Condé Nast Publications has won its long-running VAT case in the House of Lords, which could allow UK companies to recoup at least £1bn in overpaid VAT.
The Lords today unanimously agreed in favour of Condé Nast over its claim for underclaimed VAT on staff expenses going back to 1973.
HM Revenue & Customs had argued that most of the claim was outside the three-year limitation period for overpaid taxes.
Condé Nast, advised by Deloitte, said it was able to claim back so far because the UK law to cap the claim was defective and in breach of EU law around principles of effectiveness and uncertainty.
It said the UK had not included rules to allow transition from the previous uncapped system to the new limited system which came into effect in 1997.
Jason Collins, partner in McGrigors tax litigation team, said: 'This is mixed news for the chancellor of the Exchequer. Whilst hoping that all types of claim would be defeated, he will breathe a sigh of relief that the worst case scenario has not come home to roost.
'Many taxpayers who had asked for their claims to be honoured after the Court of Appeal decision will now have to return the tax. The other, successful taxpayers awaiting this decision will now be pressing HMRC to pay out their claims if they have not already done so.
'The fight may not, however, end here – 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.'
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