The ruling in the case of Conde Nast Publications v HMRC last week updated an HMRC business briefing from August 2006. This said VAT claimants should sign "clawback agreements" obliging them to repay to HMRC the cost of the original claim plus interest if they lost their cases.
Charity cases are likely to focus on reclaiming VAT on fundraising for unrestricted income, given the Children's Society's win on this issue in 2005. Oxfam, Greenpeace, the WWF, the RSPCA and the RNLI are among the charities pursuing cases.
"The threat of clawback made some smaller charities reluctant to bring claims," said Thomas Mobee, a VAT manager at accountancy firm Saffery Champness, which will be bringing claims on behalf of about 50 major charities.
"We know of charities that were thinking of bringing claims but said they would wait for the outcome of this decision."
Russell Moore, VAT partner at the same firm, added: "Numerous charities have already submitted multi-million pound claims and can now give a large sigh of relief because the threat to repay HMRC appears to have gone."
Last week's ruling, with a lead judgement by Lord Hope of Craighead, also upheld a decision by the Court of Appeal from May 2006 that it was unlawful for HMRC to impose a time-cap on those seeking to reclaim VAT incurred before 1997 (Third Sector Online, 28 January). Third sector groups can now reclaim VAT incurred as early as 1973, when the tax was first introduced into the UK.
But Moore warned that charities should move quickly because there might be a window of as little as six months to bring cases relating to older claims. The judgement said Parliament should set a time limit for submitting claims that refer to VAT payments before 1997.
"Charities that have not yet submitted claims should do so without delay because it is likely that a time limit will be stip-ulated by which claims must be lodged," Moore said. "This really is a one- off opportunity for charities to benefit from a sizeable windfall."
An RSPCA spokeswoman said: "This is obviously excellent news for animal welfare and the charity sector. We are currently discussing matters with our tax advisers and we will be pursuing a claim."