Government backs down on VAT claims

The government has climbed down on backdated VAT claims and introduced a
transitional period to allow businesses to recoup overpaid indirect tax going
back to 1973 when it was introduced.

The measure, introduced in the Budget, will give businesses until 31 March to
lodge claims for VAT they have either overpaid or underclaimed. The move follows
HM Revenue & Customs’ landmark court case against Condé Nast, in which the
House of Lords ruled against the taxman, stating that the changes made to limit
the publisher’s back claims to three years in 1996 were in breach of EU law.

According to Ernst and Young’s Charles Brayne, the legislation sends a clear
signal to HMRC on two counts: ‘Firstly, you can’t simply revoke taxpayers’
rights which have already accrued,’ he said. ‘And equally, you can’t fudge the
processes by which taxpayers have to be given adequate notice.’

Brayne said that it remained to be seen how the move would apply to other tax
changes, such as capital gains tax, pointing out a clear distinction between
rights taxpayers had already accrued, and those which they expected to accrue in
the future.

Budget 08 Special Report

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