HMRC announced, on 20 February 2008, that the three year time limit on claims for input tax and output tax is to be disapplied for certain VAT accounting periods. This development follows the recent House of Lords ruling in Fleming (t/a Bodycraft) v HMRC, Conde Nast Publications Limited v HMRC 2008 [UKHL] 2 in which HMRC was held to have been wrong to impose the three year time limit on input tax recovery without allowing for a transitional period. In a welcome move, HMRC has also included a transitional period for the introduction of the three year cap to the recovery of overpaid or overdeclared output tax, accepting that it cannot rely on the administrative transitional regime for these claims.

This means that claims may now be made for:

1. Output tax for accounting periods ending before 4 December 1996.

2. Input tax where the entitlement to deduction arose in accounting periods ending before 1 May 1997.

Note that HMRC has stated that it will make a further announcement once it has considered the full implications of the decisions.

For more information on the House of Lords decisions, see Legal update, Fleming/Conde Nast: court cannot impose transitional period for three year cap on input VAT recovery.

For general information on VAT, see Practice note, Value added tax.

Source: Revenue & Customs Brief 07/08: Three year time limit for VAT claims.