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HMRC have set out their views on the general principles for determining time limits for making claims in respect of overpaid or over-declared VAT.
The move follows the European Court of Justice (ECJ) judgment in Banca Antoniana Popolare Veneta SpA v Ministero dell’Economia e delle Finanze and Agenzia delle Entrate (C-427/10) [2012] STC 526, in which the court restated the view that it is compatible with EU law for member states to impose reasonable time limits for making claims against the tax authority for tax collected contrary to EU law, and that a two-year time limit is, in principle, sufficient.
The time constraints must not breach either the principle of effectiveness – that is, make it impossible or excessively difficult to exercise EU law rights – or the principle of equivalence: they must not be less favourable than those relating to similar claims based on domestic law.
The Revenue's view is the ECJ case is fact-specific and does not automatically introduce an opportunity for taxable persons to make out-of-time claims for repayment of VAT wrongly accounted for in circumstances in which the persons are legally required to make repayments of tax to customers.
The relevant time limit in the UK is four years. This is clearly and publicly set out in statute and it is not open to HMRC to retroactively apply shorter or different time limits in such a way it would have the effect of totally depriving a taxable person of a right to recovery.
The fact the departmment takes one view of the law does not prevent a taxable person from bringing a claim on another.
