Voluntary sector waits on VAT test case

Decision could bring hundreds of millions of pounds into charities, say experts

A Court of Appeal decision that some tax experts say could bring hundreds of millions of pounds in reclaimed VAT to the charity sector has been delayed.

The court has withheld judgement in the 'Vicglo' case between HM Revenue & Customs and a group of car dealerships. It is about whether compound interest can be claimed on overpaid VAT.

The court is waiting until a related case, known as the FII litigation, has been settled.

Hundreds of charities have already applied to reclaim overpaid VAT dating back as far as 1973 in the wake of an earlier case, Fleming v HM Revenue & Customs.

But these claims could double in value if the Vicglo verdict rules that compound interest should be paid on the sums owed.

Stuart Walsh, a senior associate with McGrigors, which is representing the lead claimants in the Vicglo case, said a judgement was not expected until late April at the earliest.

If the decision was referred to the European Court of Justice it could be put back for a further two years, he said.

"A judgement has already been made suggesting that compound interest would be payable in some cases," he said.

"But the claimants in that judgement were told that they were not entitled to claim compound interest because they had not claimed within a time limit."

Both the time limit and the initial compound interest rulings were also subject to further appeals, he added.

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