Customs faces massive VAT payout
A VAT ruling being considered by the European Court of Justice could trigger a radical shake-up in UK legislation, leaving Customs & Excise open to multi-million pound claims.
According to experts, the ECJ’s advocate general’s opinion on the long-running Marks & Spencer VAT claim-back case could eventually cost Customs millions as other companies put in their own claims for VAT repayments.
M&S has taken Customs to the ECJ to recover tax on teacakes, tinned biscuits, bottled water and gift vouchers, arguing that retrospective legislation enshrining a three-year cap on VAT claims was unlawful.
Last week, the advocate general of the ECJ ruled in M&S’s favour, an opinion rarely disregarded by the court itself. ‘It might not open the floodgates, but there could be a substantial running of water,’ warned Frank Hartley, VAT partner at Grant Thornton.
Prior to the three-year cap on claims introduced in March 1997, companies had been able to claim as far back as 1973, the year VAT was introduced, if a mistake had been made by Customs.
M&S alone is seeking to recover £12m and, according to Hartley, other companies could now argue they had only been put off claiming a repayment because of Customs’ statements.