VAT reclaims for 1997 and before

The House of Lords has found in favour of the taxpayers in the joined cases of Fleming v HMRC and Conde Nast Publications Limited v HMRC [2008] UKHL 2.

Both cases concerned claims for input tax incurred prior to the introduction of the three year cap in 1997. The court has held that the absence of an effective transitional measure, to cater for accrued rights at 1997, renders the cap contrary to the principle of legitimate expectation and ineffective at law.

As such, and until the government legislates or, less likely, the Revenue act in such a manner as to communicate effectively in clear terms the transitional provisions to VAT registered persons, it remains open to businesses to make claims in respect of pre May 1997 input tax and, by implication, claims for the repayment of pre December 1996 overpaid output tax also.

Claims will be in point even where it was not known that a claim could be made in 1997 because, for example, as with Conde Nast, the basis for the claim was not known until the outcome of another case was decided after that time.

It is probable that the window for the making of provisional claims will exist only until the Budget on 12 March.