Out-of-time claims

HMRC has released comments following a recent European Court of Justice (ECJ) case regarding out-of-time claims.

HMRC has released comments following a recent out-of-time European Court of Justice (ECJ) case.

Case C-427/10, Banca Antoniana Popolare Veneta SpA v Ministero dell’Economia e delle Finanze and Agenzia delle Entrate [2012] STC 526 concerns the application of out-of-time claims and the use of time limits by a national tax authority. Banca Antonia Popolare Veneta (the bank) charged VAT on its supplies to its customers. This was in accordance with the views of the Italian tax authority and supported by the Italian courts, and covered the period 1984 to 1994.

In 1999 the Italian authority issued a circular stating that supplies made by the bank were exempt. In light of this, the bank’s customers claimed for the wrongly charged VAT and following directions from the Italian courts they were ordered to pay back their customers.

The anomaly occurred with time limits: the bank's customers were subject to a ten-year time limit while the bank was subject to a two-year time limit for submitting claims to the Italian tax authority. The clock starts on the date of the payment or, if later, from the date on which the conditions bringing the claim were met.

The Italian Supreme Court referred the question to the ECJ asking whether it is permissible in EU law to apply longer time limits for claims made by ‘customers’ than those for a taxable person, testing the EU principle of effectiveness. The ECJ decided that there was no breach of the EU principle of effectiveness provided that the national tax authority does not ‘totally deprive’ the right to reclaim VAT wrongly accounted for.

The ECJ decision stated that the bank was ‘totally deprived’ and was due to:

  • until the publication of the circular in February 1999, the tax authority had not considered that the VAT exemption applied;
  • the judgments of the Italian courts holding that it did not had not been overturned;
  • the 1999 circular was retroactive and had the effect of moving the starting date for the time limit for claims back to the date on which the VAT was paid;
  • this had the effect that, when the circular was published, the two-year time limit for making claims against the tax authority for VAT wrongly accounted for between 1984 and 1994 had already expired;
  • at all times the bank acted as a prudent and alert economic operator;
  • on the facts of this case, the application of the time limits made it impossible or excessively difficult to make a claim against the tax authority and left the bank bearing the economic cost of the VAT which it had wrongly accounted for.

HMRC has taken its usual stance by stating that this decision is based on the facts and does not automatically apply outside of this scenario. In addition, in HMRC’s opinion it believes the recently extended time limit for claims of up to four years is a generous time limit and has been well publicised.

If you believe that this case affects you or your clients please view Revenue & Customs Brief 13/12.