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HMRC restrict historic VAT claims

27th May 2022
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A host of Appeals have been ‘in the system’ for 25 (yes, twenty five) years! The underlying issue was VAT previously overpaid on the sale of demonstrator cars. Guidance from HMRC up to 1996 had required that motor dealers use the margin scheme for second-hand goods. The ECJ ruled that the sales should be exempt from VAT, since input tax had been disallowed on their purchase.

Subsequently, HMRC came up with a methodology to determine the correct quantum, called the 'Italian Tables,’ which they published in 2003. This was necessary since original documentation would not necessarily have been available from 1973 onwards.

Some motor dealers made claims different from those based on the Italian Tables. The question then arose whether these were adjusted or new claims. This then triggered an argument based on legitimate expectation and equal treatment.

The retrospective legislation is found in FA 1997, which was HMRC’s clumsy ‘wider attempt to limit taxpayers’ rights.’ No misleading the Court there! Further clumsy legislation followed, plus clumsy HMRC guidance! So, twenty-five years later the matter remained unresolved.

The Upper Tier head the case of R T Rate Ltd as a lead case. From the brief paragraphs above you would not expect the decision to be straightforward. You would be correct! Here it is: 

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