Businesses urged to go back to the 70's to reclaim lost VAT

Businesses are being urged to revisit tax returns as far back as the 1970s to see if they are due VAT refunds following a Court of Appeal ruling to scrap a three year time limit imposed by the government in 1997.

The u-turn follows a VAT claim made by a Mr Fleming in October 2000 for input tax paid in 1989 and 1990 by his business which traded and serviced quality cars. The claim was refused as it went back more than three years.

The three year time limit was introduced with immediate effect and with little warning in 1997. This meant that few taxpayers were aware of it and so suddenly found themselves unable to claim back their VAT.

Thankfully, the Court of Appeal unanimously ruled that the three year limit had not been introduced correctly and has opened the way for refund claims to be made now in respect of VAT overpaid for periods before May 1997.

Irit Herzenshtein, partner at PKF Accountants, said: "The 1970s may be a hazy and distant memory for many but, if businesses suspect they overpaid VAT prior to May 1997, it is important to make a protective claim as soon as possible.

"I would advise anyone unsure whether they can claim, or confused about how to compile evidence required to support a claim, to seek advice."

Under UK case law, the three year limit currently remains valid for VAT overpaid on or after 1 May 1997.