Commentary

BB/9A/97 Extension of “capping” to claims for refunds other than for amounts overpaid as VAT

Part V16 Forms and other HMRC material

BB/9A/97 Extension of “capping” to claims for refunds other than for amounts overpaid as VAT

BB/9A/97 Extension of “capping” to claims for refunds other than for amounts overpaid as VAT

Business Brief, Issue 9. 27 March 1997

Customs and Excise laid secondary legislation on 26 March 1997 which introduces a three year time limit—”the cap”—for corrections and adjustments including refund claims for input tax not covered by FA 1997 [The VAT(Amendment) Regulations, SI 1997/1086].

On 18 July 1996, the then Paymaster General announced the introduction of a three year time limit on claims, mainly from payment traders, for refunds of amounts overpaid as VAT. However, no similar provisions were introduced for capping claims by way of secondary legislation, and there remained a number of methods of reclaiming VATwhich were not subject to a three year cap. The legislation introduced on 26 March 1997 corrects this anomaly.

The changes will take effect on 1 May 1997 and will mainly affect repayment traders.

For ease of reference, any corrections and adjustments including refund claims for input tax are referred to as “claims” in the following text.

The effect of the changes

The amendments extend a three year time limit to—

Late claims for input tax. If a business did not claim input tax on the proper return, it cannot claim input tax on a later return made more than three years after the date when the input tax should have been claimed.

Correction of errors. Errors cannot be corrected more than three years after the period in which the errors arose. This is regardless of whether the correction is made within the VAT account (for

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