TaxCorporate TaxTaxman drags heels over £1bn VAT refunds

Taxman drags heels over £1bn VAT refunds

Companies are waiting for £1bn in overpaid VAT to be returned to them in a long-running legal dispute, with nearly 1,000 businesses missing out on the cash

The delays follow a Court of Appeal ruling that the introduction of the
three-year limitation on claims for overpaid VAT prior to 1997 was unlawful, as
there was not an adequate period of transition in the new regime.

HM
Revenue & Customs
invited claims for repayments in August last year,
but, according to Baker Tilly, only a handful of the 800 claims made to date
have been processed because only two officers were originally appointed to
process the claims.

The number of staff allocated to the task has since been increased to four,
but advisers remain frustrated that more staff were not called in to process the
claims, as it was obvious that the hundreds of businesses would seek VAT
repayments.

The cases, which involved companies such as Condé Nast, have been dragging on
for years with car dealers making up many of the claims.

Steve Hodgetts, head of VAT at Baker Tilly, said: ‘The average claim is
likely to be around the £1m mark, so HMRC could be facing repayments of anywhere
between £500m and £1bn. There are a lot of demons out there for HMRC.’

According to Baker Tilly there are businesses that made claims for overpaid
VAT in August and September last year, but have yet to receive an acknowledgment
of their claim, let alone a refund.

‘It cannot be right that, having succeeded at the Court of Appeal in arguing
that the three-year cap was unlawfully introduced, traders are now being
prevented from receiving VAT due to them by a shortage of staff at HMRC,’
Hodgetts said.

Responding to the criticism, HMRC said that while it regretted delays to
repayments, it believed that it had provided ‘proportionate’ resources to manage
the claims.

‘Assuring the accuracy of claims, that often cover many years, can be made
difficult by the absence of detailed business records for early years. HMRC is
committed to improving customer service, but we also have a duty to the wider
tax payer to ensure that amounts claimed are supported by evidence,’ HMRC said in
a statement.

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