Ulster firms could reclaim millions in VAT

Northern Ireland firms could claim a VAT repayment windfall after a legal battle by retailers, Marks & Spencer.

In a landmark ruling, the European Court of Justice (ECJ) found that UK Customs and Excise was wrong to retrospectively apply a law it introduced in 1996 limiting repayments of VAT to three years.

According to PricewaterhouseCoopers (PwC), M&S who brought the case, and other companies refused VAT rebates because of this rule, can reclaim overpayments more than three years old. Some claims could even go back as far as 1973, the date VAT was introduced.

Urging Northern Ireland companies to check their VAT records and seek advice on possible claims, Martin Fleetwood, a director from PwC, said millions of pounds were at stake.

“This is great news for firms who may be owed VAT by Customs and Excise but have been denied their full rebate by the incorrect manner in which the three-year rule was introduced," he said.

"However, actual claims may not be that straightforward. In the first instance, businesses need to look back at earlier accounting records to check if capping was applied as a result of the three-year rule.

“Given that some claims may prove complex it may be advisable to seek expert advice as every case is unique and may require detailed review before a claim can be successfully brought. Nevertheless, it is estimated that millions in rebates could be claimed and every company that traded before 1996 should immediate check it s VAT records.”

Prior to July 18 1996, businesses that overpaid VAT could retrospectively claim a refund, going back to 1973 - when VAT was introduced. However, in July 1996 the government announced that, with effect from that date, such repayment claims could not go back more than three years.

M&S challenged this through the courts and the ECJ decided in July that the UK had acted contrary to Community Law, and that the UK Government should have allowed taxpayers a transitional period to exercise their rights to pursue repayments, as long as they could demonstrate they knew about the potential repayment claim by March 31 1997.

While Mr Fleetwood said the ECJ ruling in the M&S case could have huge implications for Northern Ireland companies, he warned: "It is essential, that action be taken immediately as any claims need to be submitted by March 31 2003. Beyond that date there is no chance of any repayment, regardless of the amount owed."

(SP)