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HM Revenue and Customs Brief 13/12


HM Revenue and Customs -Tax Authorities

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Issued 11 May 2012

Judgment of the Court of Justice of the European Union (ECJ) – Case C-427/10, Banca Antoniana Popolare Veneta SpA -v- Ministero dell'Economia e delle Finanze and Agenzia delle Entrate [2012] STC 526 (Banca Antoniana) – out-of-time claims for overdeclared indirect taxes


This Brief is aimed predominantly at professional tax advisors and lawyers although it may be of interest to others.

While the judgment in Banca Antoniana concerned VAT, the judgment, and this Brief applies to all of the taxes previously administered by HM Customs & Excise.

Background - Claims for overpaid VAT and time limits

Where a person has accounted for tax contrary to EU law, he or she is entitled to make a claim to recover it - Case 199/82, Amministrazione delle Finanze dello Stato - v - SpA San Giorgio [1983] ECR 3595; [1985] 2 CMLR 658 at paragraph 12.

However, Member States are permitted to impose reasonable time limits on such claims provided that those time limits do not breach either the principle of effectiveness (the time limits must not be framed so as to render impossible or excessively difficult the exercise of EU law rights) or the principle of equivalence (they must not be less favourable than those relating to similar claims based on domestic law).

The imposition of such time limits on claims for repayment of overpaid or overdeclared tax does not, of itself, breach the principle of effectiveness even where it leads to the complete dismissal of the claim - Case C-188/95, Fantask A/S & Ors - v - Industriministeriet (Erhvervsministeriet) [1998] All ER (EC) 1 at paragraph 48.

Time limits as short as one year have been held to be reasonable by the ECJ - Case C-261/91, Rosalba Palmisani - v - Istituto Nazionale della Previdenza Sociale (INPS) [1997] ECR I-4025 at paragraph 29.
The ECJ has already held that the time limits in the UK are reasonable (Case C-62/00, Marks & Spencer Plc - v - CCE [2002] STC 1036 at paragraph 35) and Revenue & Customs Brief 14/12are not liable to make it excessively difficult or impossible in practice for claims to be made to recover amounts levied or collected by way of tax in breach of EU law. Since that judgment was delivered those time limits have been increased from three years to four.

ECJ judgment in Banca Antoniana

Banca Antoniana Popolare Veneta (the bank) is an Italian bank which, in accordance with the view of the Italian tax authority and the Italian courts, charged VAT on services supplied to its customers between 1984 and 1994.

In 1999 the Italian tax authority issued a circular stating that it was their view that these services ought to have been exempt from VAT.
The bank's customers made claims against it for repayment of the VAT that it had wrongly charged to them and the bank was ordered by the Italian courts to pay those claims. The bank then made a claim against the Italian tax authority for the VAT that it had wrongly accounted for on the supplies to those customers.

Whilst the claims made by the customers against the Bank (Customers' Claims) were subject to a ten-year time limit, claims by the Bank against the tax authority (Taxable Persons’ Claims) were subject to a time limit of two years from the date of payment or, if later, from the date on which the conditions for bringing the claim were met.

The Italian tax authority rejected the bank's claim on the grounds that the claim was made out-of-time and that decision was upheld by the courts.

The Italian Supreme Court referred a number of questions to the ECJ, essentially asking whether it is permissible in EU law to apply time limits to Customers' Claims that are longer than those applied to Taxable Persons' Claims.

The Court of Justice confirmed that rules of national law which apply a more generous time limit to Customers' Claims than to Taxable Persons' Claims do not breach the EU principle of effectiveness provided that the conduct of the national tax authority combined with the existence of the time limit does not have the effect that a person is totally deprived of the right to obtain a refund of VAT wrongly accounted for.

The ECJ found that, in all the circumstances of this case, the bank was, in fact, totally deprived of any opportunity to make a claim and the following factors were taken into account by the Court in reaching that conclusion:

  • 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 didn’t 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

HM Revenue & Customs view

In giving its judgment, the ECJ restated the well-rehearsed view that it is compatible with EU law for Member States to lay down reasonable time limits for making claims against the tax authority for tax collected contrary to EU law and that a two-year time limit is, in principle, sufficient.

HM Revenue & Customs' (HMRC) view is that this case is very fact-specific and that it does not automatically introduce an opportunity for taxable persons to make out-of-time claims for repayment of VAT wrongly accounted for in circumstances where they are legally required to make repayments of 'tax' to their customers.

As noted above, the time limit has since been increased from three years to four. These time limits are clearly and publicly set out in statute and it is not open to HMRC retroactively to apply shorter or different time limits in such a way that it would have the effect of totally depriving a taxable person of a right to recovery. The fact that HMRC takes one view of the law does not prevent a taxable person from bringing a claim on another.

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© Crown Copyright 2012.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs.

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Article Published/Sorted/Amended on Scopulus 2012-05-17 12:38:33 in Tax Articles

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