Currently claims for the recovery of taxes unlawfully levied under community law can be made in a variety of ways. One important way is as a common law claim in restitution for payments made under a mistake of law which, as the law currently stands, have an extended time period for making claims (in some cases back to 1973) and permit claims for compound interest.
Starting at page 203 of the notices issued today with the budget are BN87 and BN91 which propose changes to the way claims can be made for overpaid tax and how interest on overpayments is to be assessed.
For income tax, capital gains tax and corporation tax the intention is to extend the statutory remedies currently available, limit claims to a 4 year claim period and exclude HMRC from any other liability to repay. These changes will take effect from 1 st April 2010.
Presumably the objective of these changes is to exclude tax matters from the ambit of restitution claims. The previous legislative attempts to do so (s320 FA 04 and s107 FA 07) were found to be ineffective in the recent judgment in the FII Group Litigation case, now under appeal.
With effect from Finance Bill 2009 receiving Royal Assent (ca July ’09) rules will also be introduced to harmonise interest rates paid on refunds of overpaid tax. No mention is made as to whether this is intended to exclude claims for compound interest although the combined effect of excluding liability other than for certain prescribed claims and limiting those claims to simple interest may have the same effect.
If these proposed changes have the result of rendering it practically impossible or excessively difficult to enforce community rights then they may fail before the courts. We understand from PwC that the draft of FB 09 is due on 30 April.
Clearly for claimants considering issuing claims particularly including compound interest and/or seeking to rely on a longer time limit than 4 years will wish to consider acting as soon as possible and before JuneJuly 2009. For those with existing claims it may be worthwhile reviewing them before the same deadline expires.