HM Revenue & Customs has opened the floodgates to a possible £1bn in VAT refund claims, after the landmark House of Lords ruling last month that the taxman had acted unlawfully in imposing a three-year limit for reclaiming VAT on business costs in 1997.

Vogue and Tatler publisher Condé Nast, which brought the case to the courts in 2002, will be among the first businesses to be paid.

It claimed £100,000 of staff travel and subsistence expenses going back to 1973.

In a briefing note released by HMRC yesterday the taxman said the judgement in the Condé Nast case also applied to claims to recover VAT overpaid or overdeclared in accounting periods ending before 4 December 1996.

'Claims will now be paid, following verification, without the need to provide an undertaking to repay HMRC,' the taxman said.

Claimants who have been paid on condition that they would repay HMRC if the House of Lords found in favour of HMRC have also been released from those undertakings.

Deloitte, the accountancy firm which acted for Condé Nast, said the government had given evidence to the Lords that it could face claims totalling £1bn, but HMRC has not confirmed this figure.

Further reading:
Advisers to get Condé Nast windfall
Read the HMRC briefing note here