The possibility of recouping money owed stems from the recent Fleming case,
which allowed VAT reclaims going back as far as 1973.
Following a decision by the House of Lords earlier this year that businesses
can resubmit previously rejected claims, the 31 March 2009 deadline is fuelling
a boom in recouped claims.
Given many claims are expected to run into the millions of pounds, the
administration process is believed to be lengthy, with businesses delaying
resubmissions at risk of missing out on money owed.
HM Revenue and Customs
(HMRC) has itself estimated the claims to total as much as £1bn.
Paddy Behan, head of indirect tax services at Mercury Tax Group, said the ruling
covers claims from the introduction of VAT in 1973 up to 1997.
Behan believes claims should be revisited and businesses that have repayment
claims should re-check documentation.
However, limits will apply as many figures are based on estimates. But,
because taxpayers are only required to retain documentation for a period of six
years, some estimates may be forgotten, or an agreement could have been complied
with under pressure.
‘Every taxpayer should look at their claims, and we can expect [HMRC] to
begin to use arguments to defeat increases in claims. It’s a big issue we’re
talking hundreds of millions of pounds,’ he said.
Stuart Hindle, indirect tax partner at KPMG in the UK, said many companies
have been caught off-guard about their eligibility to submit claims largely
because the relevant dates extend back more than a decade.
‘If businesses don’t act quickly they run a risk of losing out, as all claims
must be submitted by the end of March next year. This is much sooner than it may
appear as the process for putting a claim together will involve extrapolating
back, as records from the early Seventies will not be available,’ he said.
The motor vehicle industry in particular is expected to submit a large number
of claims, as the tax is relevant to the industry irrespective of whether
dealership principals are still in business.
Mike Sheppard, VAT partner at Grant Thornton, says tax rules have since
changed for motor dealers and this is their final opportunity to recoup overpaid
Sheppard says Grant Thornton has already submitted a large number of claims
in the lead up to the March deadline and expects a spike over the coming months.
‘It’s drawing a lot of interest and rightly so. The challenge is that the
periods in question are so long ago that reliable business records are hard to
come by,’ he says.
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