Fleming (t/a Bodycraft), Condé Nast Publications Ltd v HMRC

HL [2008] STC 324; [2008] UKHL 2; [2008] 1 All ER 1061

The House of Lords ruled in this VAT refund case, with a majority of 4-1, the Law Lords upheld the previous Court of Appeal decision, ruling the three year cap for businesses to reclaim overpaid VAT was illegal introduced.

This decision follows a long line of litigation challenging the three year cap, headlined in the now infamous European Court of Justice case brought by Marks & Spencer’s in 2002. The Marks & Spencer’s case covered their claim for overpaid output tax. In Condé Nast’s case it was for input tax.

Condé Nast initially made a claim for overpaid VAT covering the period 1973 to 2000. The judgement turned on the manner in which the three year cap was introduced by HM Revenue & Customs. It was decided that an insufficient transitional period was provided when introducing the three year cap rule back in 1996 and 1997.

HMRC introduced the three year cap for output tax with effect from 4 December 1996 (legislation reference Section 80 VAT Act 1994) and for input tax with effect from 30 April 1997 (legislation reference Regulation 29 VAT Regulation 1995/2518).