If you adjust a claim for overpaid VAT, under what circumstances does that second adjustment constitute a new claim, and is itself subject to a new four year limit?
Although there are other technical issues in this case, and the taxpayer lost on one of those issues, the decision helpfully discusses the question above. Read paras 26 to 28 for the discussion and conclusion on this point.
The key test is found in the previous decision of Wheels Common Investment Fund Trustees Ltd, which is quoted here:
- 13. It seems to me that Reed Employment and Vodafone show that the first step in determining whether an amendment to grounds of appeal relating to a claim for repayment is a new claim, is to identify the fundamental character or elements of the original claim. The fundamental character or elements of a claim are to be found in the facts and circumstances of the claim which can be ascertained from the methodology by which the amount of the claim is calculated and the reason given why the amount accounted for was not output tax due. The relevant elements include the particular supplies or transactions which gave rise to the claimed overpayment of output tax and the specific output tax claimed (but not necessarily the amount). It is then necessary to consider whether the amendment, if allowed, would change the fundamental character or elements of the original claim to such an extent that it is a separate claim.
- 14. An amendment that does not change the fundamental character or elements of the original claim is not a new claim but an amendment to the original claim. Errors and omissions that do not enlarge the scope of the claim by adding elements not in contemplation when the claim was originally made would not normally constitute a new claim. It appears from both Reed Employment and Vodafone that changes to the amount claimed or the method of calculation [my underlining] do not, without something more, alter the fundamental character of the claim. An amendment that extends the facts and circumstances beyond those contemplated by the earlier claim is a new claim. For example, an amendment that extends a claim to include supplies to clients not included in the original claim will be a new claim and not an amendment to the original one. In Reed Employment, the further demand in that case and the examples given by Roth J of further demands that constituted new claims all involved, if permitted, enlarging an existing claim by including supplies that were outside the scope of the original claim although they arose from the same error. In Vodafone, the further demand related to errors and supplies entirely unconnected with those that formed the basis of the original claim and, therefore, a separate claim.
The latest FTT decision is here: http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10728
About Les Howard
Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire
I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.