Customs faces more three-year paybacks
Argos and Elida Gibbs plan to challenge the Government’s controversial three-year rule on VAT repayments in a bid to maximise successful claims in the European Court of Justice.
The move increases the pressure on Customs & Excise, which now faces numerous assaults on the diktat. A VAT tribunal released a partial decision in favour of the rule’s opponents last Thursday, while the High Court is expected to hold a judicial review before the end of November.
The retrospective rule, introduced with immediate effect on 18 July, is due to join the legislative programme in next month’s Finance Bill.
Customs forecasts a #70m payback industry-wide as a result of last week’s Luxembourg ruling in favour of the two companies.
They won backing for claims of overpaid VAT on promotional discounts and money-back voucher schemes.
The Government’s loss will soar to at least #200m if the three-year rule is not applied. Argos’s claim was worth #1.4m while Elida Gibbs received #880,000, but hundreds of other companies ran similar campaigns.
Moret Ernst & Young director of European VAT services, John Arnold, who advised Elida Gibbs, estimated that 30% of claims will fall outside the time cap. ‘The three-year rule has a big impact on the case,’ Arnold said.
‘We are looking to a challenge as the rule frustrates the decision of the court.’
Deloitte & Touche VAT partner Andrew Ball added: ‘This raises the spectre of the three-year rule and how much it will actually cost the Government.
Enforcing the rule is just like giving a sleeping tablet, they will have to wake up to the real cost sooner or later.’
Customs has granted NHS trusts five more weeks to claim for VAT recovery on contracted out services. The one-year limit on claims could cost the NHS #142m. The period for finalising VAT matters at year-end has been extended to three months.
