The Court of Appeal ruled in favour of the Midlands Co-operative Society paving the way for the retailer to reclaim £100,000 worth of VAT on a business it bought called the Leicester Co-op in 2001.

The court ruled that where a company bought another group’s trade and assets, but not shares, it has the right to claim VAT repayments owing to the purchased entity.
Previously it had been thought that without buying the shares, the tax could not be reclaimed.

The ruling opens the door to dozens of other retail motor dealers who wish to reclaim VAT repayments on companies they have acquired.

Businesses can reclaim VAT overpaid going back to 1973, advisers said.

Paddy Behan, head of indirect tax at Mercury Tax Group, said: ‘From my experience I think it’s reasonable to forecast that total claims by the retail motor industry alone could reach hundreds of millions.’

Companies can claim the VAT repayments until 31 March 2009.

It is understood that advisers are already identifying dozens of potential claimants.
A spokeswoman for HMRC said: ‘This is a complicated judgment which HMRC is looking at carefully. We are taking legal advice before deciding how to proceed.’