Court battle to reclaim VAT (From The Northern Echo)

Court battle to reclaim VAT

9:34am Thursday 18th March 2010 in

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THREE of the region’s councils have launched a court battle to reclaim VAT – potentially worth millions of pounds.

Durham County Council and Newcastle and York city councils have joined a national challenge which could cost the Treasury £75bn – nearly ten per cent of total public spending.

Claims include tax paid on exempt items such as offstreet parking fees, library fines and sports centre admission charges. Some could date back as far as 1973, when VAT was introduced.

Swansea City Council is leading the courtroom campaign, aimed at clawing back billions of pounds in VAT which town halls and major companies claim was wrongly paid to the Government.

But more than 150 other councils and firms are bringing claims under a “window”

introduced by ministers from April 2008 to March last year, during which back-claims would have to be lodged.

After that, a four-year limit was imposed on claims.

Some claims have been paid, but legal disputes have flared up over council services that, authorities claim, ought to always have been VAT exempt.

The Treasury is reported to have set aside £5bn to meet these claims, but experts believe the total could hit £15bn.

And, in unconnected cases, courts are being asked to rule that rebates of indirect taxes, such as VAT, ought to be paid with compound interest. If judges agree, the £15bn bill could be multiplied five times.

Lorraine Parkin, head of VAT at accountants Grant Thornton, said: “Local authorities are known to have put in significant claims. Dealing with them is consuming a lot of staff resources at the HM Revenue and Customs.”

Durham County Council, Newcastle City Council and York City Council have each filed claims to the Queen’s Bench Division of the High Court described as “expected to exceed £300,000” – the highest category available, which includes anything above that figure.

The county council did not disclose the value of its claim.

However, a spokeswoman said: “We can confirm that we are engaged in claiming back overpaid VAT as part of action by a number of authorities.”