Experts slate Customs plans to claw back VAT
Customs & Excise’s plan to ‘claw back’ millions of pounds in VAT repaid to businesses after last week’s landmark High Court ruling drew severe criticism from tax experts this week.
The department agreed to pay out #35m in overpaid VAT last week following a judicial review which ruled it acted illegally by refusing to honour agreed repayments.
But Customs immediately declared its intention to recoup the money as soon as the diktat, introduced retrospectively without consultation on 18 July, becomes a Budget Resolution next week.
The announcement baffled companies seeking refunds. Customs, which warned it will make full use of its powers to recover the refunds, will make returns according to priority, with judicial review winners first in line.
It has offered businesses the opportunity to wait for repayment pending parliamentary approval.
Deloitte & Touche VAT partner John Kennedy said: ‘There’s a great deal of confusion, doubt and misunderstanding because there have been so many stages in this process for companies to follow. It is not a healthy environment as certainty has to be the key feature in any arrangement for the collection of taxes. Many of our clients are simply unsure about what to do.’
Price Waterhouse head of VAT, Richard Watson, added: ‘Customs’ actions may be illegal. They are paying back overpaid tax and now they want to try to claim it back – but it’s not really a tax that was ever due. Companies are annoyed. They accept a basic understanding that they should not benefit from repayment, but in certain circumstances they are due money back.’
