Commentary

V3.405 Capping provisions in relation to input tax

Part V3 Supplies, acquisitions and imports

V3.405 Capping provisions in relation to input tax

V3.405 Capping provisions in relation to input tax

The introduction of the capping provisions

On 18 July 19961, a three-year time limit was placed on the refunding of tax claims made under VATA 1994 s 802 (credit for/repayment of overstated or overpaid VAT). The legislation was introduced by FA 1997 with effect from 19 March 1997 (date of Royal Assent)3 following legislation under the Provisional Collection of Taxes Act 19684 and was intended to have retrospective effect. The scope of the restriction has since been further extended.

The effect of the so-called “cap” was to restrict the liability of HMRC to make repayments under VATA 1994 s 80 to a period of three years commencing with the date of the repayment claim. The three-year limit under s 80 was extended to four years with effect from 1 April 2009 (see V5.159C).

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