Compound Interest on VAT Claims!

It may be possible to claim compound interest on overpaid VAT where a taxpayer mistakenly pays too much VAT, particularly where there was no error of the part of HMRC. It is important to act as soon as possible, so if any of your clients have in the last 6 years overpaid or under recovered VAT through his/her own mistake perhaps by a simple oversight or accounting system error they are entitled to make a claim for compound interest to HMRC. This is even possible where simple interest has already been paid. See Sempra Metals tax case.

Three year capping

The House of Lords has now heard appeals against the Court of Appeal’s decisions in the cases of Conde Nast and Fleming. It is possible that the Judgment may be issued before Christmas but most likely it will be delivered in the New Year. Apparently one of their Lordships mentioned “temporal limitation” which means that only claims submitted before the decision is released will be accepted. This is a very rare situation but it is possible that this could affect belated claims to recover output tax overpaid before 4^th December 1996 and input tax under recovered before 1^st May 1997. We would recommend that any claims be submitted as soon as possible just in case.

Elysian Associates

November 2007