Opportunities for Singapore companies to claim sizeable VAT refunds in the United Kingdom

Singapore, 11 February 2009 – Amid a global financial crisis when businesses are bearing the brunt of a credit crunch and cash is king, businesses in Singapore may find an unexpected source of cash if they have subsidiaries in the United Kingdom (UK) who have paid value-added tax (VAT) prior to 1 May 1997. However, the window of opportunity is closing as multinational companies with UK subsidiaries have until 31 March 2009 to submit VAT refund claims to HM Revenue & Customs (HMRC).

They could recover significant amounts of money for input VAT not claimed in the period prior to 1 May 1997 and for output VAT over-declared in the period before 4 December 1996. Such claims can go as far back as 1973 when VAT was first introduced in the UK.

Koh Soo How, Tax Partner at PricewaterhouseCoopers Services LLP in Singapore, explained that in 1996 and 1997 the UK government introduced legislation which meant that any claim for overpaid or under-recovered VAT will have been subject to a three-year time limit. However, in January 2008 the House of Lords ruled in the case of Fleming and Condé Nast that the UK’s implementation of the three-year capping (as it is known) was in breach of European Commission law because no allowance had been made for a transitional period in the UK legislation. Furthermore, the House of Lords said that HMRC had failed to respect the ‘legitimate expectations’ of taxpayers who had could have made a claim before the time limits were introduced.

Koh said:

“As a consequence of the House of Lords decision in Fleming and Condé Nast, the UK taxpayers have a window of opportunity until 31 March 2000 to submit claims which could include additional claims for compound interest. Virtually every long-standing multinational company could have at least one potential VAT claim and many taxpayers who initially believed they could not make a claim have successfully gone on to do so. This has resulted in quite a number of claims paid by the UK revenue and customs authorities.

“In the current economic climate, when cash flow is stretched, a Singapore company with a business in the UK should examine if they have reason to submit a claim for the VAT. With less than two months to benefit from this one off opportunity, companies must act now.”

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Notes:

1. When a company that is registered for VAT buys goods or services from another supplier, VAT is charged on the purchase cost. This is input tax. Similarly, when the company sells its own goods or services it charges its customers VAT at the same rate. This is output tax.

2. It was the House of Lords ruling in the combined case of Fleming (t/a Bodycraft) v HMRC and Condé Nast Publications Limited v HMRC [2008] UKHL 2 that led to the VAT refund opportunity with HMRC.


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