Correcting a refund – third party adjustments

Les Howard
VAT Consultant
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A case is due to be decided at the ECJ on the time limits applicable to VAT adjustments.

A supplier invoiced Volkswagen for moulds for the manufacture of car lights. Originally, thinking the supplies were financial compensation, the supplier did not charge VAT. On discovering the error, VAT was charged to cover the period 2004 to 2010. VW submitted a corresponding input tax adjustment on 1 July 2011. By this time part of the claim was ruled as ‘out of time.’  All this seems very unfair, as the national tax authority would be enriched by this outcome. (This was the Slovakian Republic.)

The Advocate General, very wisely, reduced the whole issue down to a single question:

 It seems to me that, summarising the four questions, what we are trying to ascertain is whether it is permissible under EU law … to refuse to grant a taxable person a refund of input VAT on the grounds that the time limit for exercising that right has expired, in a situation where: (a) it was thought, wrongly, that the supply of goods was not subject to VAT; and (b) the subsequent adjustment took place several years later, with the taxable person paying the VAT at that time and then claiming it back later.

The AG took the common-sense view that, where an adjustment is made in the circumstances described, the recipient is entitled to a refund. Simple and sensible.

I am looking forward to the full Court agreeing with this one!

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.


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