News - indirect

Late payment

In August 2006, HMRC invited taxpayers to submit claims for VAT overpaid prior to1997; see Business Brief 13/06. This was on the basis that, in Michael Fleming (trading as Bodycraft) v CRC (Condé Nast Publications Ltd intervening) [2006] STC 864, the Court of Appeal ruled that the three-year limitation period for claims of overpaid VAT was not introduced lawfully as there was no adequate period for transition. As a consequence, traders' claims that were previously rejected by HMRC for being out of time could now be submitted to HMRC for repayment.
Some 800 claims have been submitted by businesses nationally but, according to Baker Tilly, very few have been dealt with by HMRC. The reason would appear to be down to lack of man power, since until only recently, HMRC had only allocated two officers to handle the processing and repayment of all these claims, despite the fact that they must have anticipated that a large number would be forthcoming. Baker Tilly have been told that HMRC have now allocated additional resource but few claims appear to have been processed.
The result of this is that many businesses that submitted claims back in August and September have not even received an acknowledgement from HMRC that their claims have been received let alone any refund of the VAT.
Steve Hodgetts of Baker Tilly welcomes the fact that more officers are now working on processing these claims, but adds that 'this increase in personnel is long overdue'. He says that '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'.
Cynics among us might surmise that HMRC are delaying payment of claims in the hope that the House of Lords will accept their appeal and that claims will therefore not be due.

Categories: News , Admin , VAT