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Reclaim VAT before it's too late, charities urged

By Ben Cook, Third Sector Online, 25 January 2008

Charities that believe they overpaid VAT between 1973 and 1996 have been advised by tax experts to make repayment claims immediately in the wake of a House of Lords ruling.

Gerry Myton, a VAT expert at accountancy firm PKF, said there was likely to be a “six-month window of opportunity” in which charities could claim for overpaid VAT after the Lords ruled on the Condé Nast v HM Revenue & Customs case on 23 January.

VAT was introduced to the UK in 1973, and a three-year cap on repayment claims was imposed in December 1996. Myton said the ruling was significant because it meant any overpayments of VAT made between those dates could still be claimed back.

“Any charity that thinks it might have overpaid VAT should consult its tax advisers as early as possible,” Myton said. “HMRC will undoubtedly move to close this window as soon as possible. This is a 23-year period, so a great deal of paperwork needs to be examined.

“The only issue is whether calculations will be made on a compound basis, because that will significantly increase the sums payable. Given HMRC’s attitude to this over the years, charities should be entitled to compound interest, but it may be necessary to go back to court to get that principle established.

“I have a number of business clients who are taking legal action before the VAT and Duties Tribunal on that point, and I’m talking to a number of charities.”