Where a VAT registered trader has overpaid VAT there is a section in the VAT legislation (section 80 of VAT Act 1994) that allows the trader to reclaim the overpayment from HMRC.  Before 19 March 2008 this section time barred claims to 3 years from the end prescribed account period, the monthly, quarterly or annual VAT return periods.  A case was taken to the House of Lords at it was found that this rule was incompatible with the EU law principles of effectiveness and legitimate expectation.  The rule was adjusted to become four years as opposed to three with effect from 1 April 2009 but a transition period between the budget (19 March 2008) and 1 April 2009 was enacted to remove the time bar altogether where a claim was made before 1 April 2009.  This gave traders just over a year to lodge claims for the period since the inception of VAT to 4 December 1996 and of course many traders took advantage of this generous transition period.

One such trader was a car mechanic based in Worcestershire.  This trader submitted a claim, via his solicitors for a period from 1973, VAT inception to 4 December 1996.  HMRC rejected the claim as the claim wasn’t broken down into prescribed accounting periods, ie the VAT return periods that the trader would have submitted his returns under.

The First-tier Tribunal, the Upper Tribunal and now the Court of Appeal have now all sided with HMRC that any claims under section 80 have to be allocated to prescribed accounting periods.

This is all the more difficult for this trader as one of the main reasons for requiring the claims to be made by accounting period is to check that they haven’t been time barred but for his particular claim there was no time bar in place as long as it was made by 1 April 2009.

The decision can be found at:  Bratt Autoservices Company Ltd v HM Revenue and Customs – Find case law (nationalarchives.gov.uk)

This is a difficult outcome for the trader but the legislation is fairly clear.  Obviously by the time the case had been resolved in court the time period to 1 April 2009 for historic claims had closed so a new letter breaking down the claim could not be resubmitted.

Please do contact us if you have any questions with VAT.  We can help ensure that any claims for overpaid VAT are effective.