From 1 April 2010, the UK Government introduced a statutory mechanism for taxpayers to make claims for overpaid tax to replace the previous system of making an error or mistake claims. The legislation excluded claims for overpaid tax made in certain specified circumstances, including mistake claims and introduced a prevailing practice exception in relation to such claims.

The UK Government has now announced that it plans to introduce legislation in the Finance Bill 2013 to remove the restriction for claims where the overpayment of tax has been paid in accordance with the practice generally prevailing at the time where the tax has been levied contrary to EU law. This formalises the position noted in Brief 22/10. A transitional period of six months following Royal Assent to the Finance Bill 2013 will be allowed.

The decision to allow a transitional period before the new rules come into effect suggests that there may be lingering concerns that at present overpayment relief, because of the prevailing practice exception, does not provide an effective remedy for EU claims. Such concerns have no doubt been driven by the recent decision of the Supreme Court in the FII GLO, rejecting HMRC’s view that error or mistake claims (the predecessor of overpayment relief) could be converted into an effective remedy to the exclusion of others by ignoring the prevailing practice exception.