If you think that you have paid too much tax and are due a rebate, you should seek expert advice straight away because strict time limits apply. A vehicle manufacturer found that out to its cost when the Court of Appeal rejected its claim for a multi-million pound rebate in respect of alleged VAT overpayments in the 1970s and 1980s.
The manufacturer claimed to have made promotional payments, or rebates, to buyers of its commercial vehicles between 1978 and 1989. It argued that those payments served to reduce the price of the vehicles, but that VAT adjustments had not been made in respect of them. It thus claimed repayment of £73,361,865 but faced stiff resistance from HM Revenue and Customs.
The manufacturer’s case rested on the Sixth Council Directive of May 17 1977 (77/388/EEC) which provided that promotional reductions in the price of goods should be taken into account for VAT purposes, reducing the taxable amount. The provision should have been implemented by January 1978, but the UK did not introduce legislation to give effect to it until the end of the 1980s.
Following a preliminary hearing, the First-tier Tribunal found that the manufacturer’s rebate claim was not time barred. That was on the basis that the claim was not subject to either a domestic time limit or any requirement under European Law that a claim should be brought within a reasonable time of a price reduction. The Upper Tribunal, however, took the opposite view and ruled that the manufacturer’s claim had been brought too late.
In dismissing the manufacturer’s appeal, the Court found that the time limit on rebate claims contained within Section 80 of the Value Added Tax Act 1994 applied to the case. By virtue of the directly enforceable directive, the manufacturer had an immediate right to maintain that it was entitled to rebates when the promotional payments were made. On that basis, the manufacturer’s claim should have been lodged by January 2009 at the latest and was thus time barred in its entirety.