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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific receipts: refunds of sums paid as VAT: time limit for claims

This is direct tax guidance; for indirect tax guidance, refer to VAT Guidance.

S80 Value Added Tax Act 1994

Claims for refunds of VAT made on or after 1 April 2009 must be made within four years of a specified date, usually the end of the entity’s VAT accounting period.

Originally, claims could be submitted for periods as far back as the introduction of VAT on 1 April 1973, but in 1996/97 legislation was introduced with the intention of reducing the time limit for VAT claims to three years. In 2002, however, the European Court of Justice held in Marks & Spencer Plc C-62/00 that the UK had breached EC law (now EU law, following the Treaty of Lisbon) because it had failed to provide an adequate transitional period to allow claims to be submitted for periods before the new time limit took effect. The House of Lords, in Fleming (t/a Bodycraft) v HMRC and Condé Nast Publications Ltd v HMRC [2008] UKHL 2 held that that the three-year cap had to be disapplied in relation to pre-implementation periods until an adequate prospective transitional period for businesses to make claims had been provided.

Consequently, the Finance Act 2008 introduced a statutory transitional period running until 31 March 2009 during which businesses could make claims for:

  • output tax over declared in tax periods ending before 4 December 1996, and
  • unclaimed input tax where the entitlement to claim arose in tax periods ending before 1 May 1997.

This resulted in a large number of claims originating from several different misapplications of VAT law. You may see these cases referred to as ‘Fleming’ or ‘refund of sums paid as VAT’ cases. A number of judgments of the European Court of Justice have resulted in substantial payments to traders for accounting periods covering many years, by way of refunds and statutory interest. The nature of the claim is significant as it may affect the direct tax treatment.