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The introduction of the capping provisions

On 18 July 1996¹, a three-year time limit was placed on the refunding of tax claims made under VATA 1994, s 80² (credit for/repayment of overstated or overpaid VAT). The legislation was introduced by FA 1997 with effect from 19 March 1997 (date of Royal Assent)³ following legislation under the Provisional Collection of Taxes Act 1968⁴ and was intended to have retrospective effect. The scope of the restriction has since been further extended.

The effect of the so-called 'cap' was to restrict the liability of HMRC to make repayments under VATA 1994, s 80 to a period of three years commencing with the date of the repayment claim. The three-year limit under s 80 was extended to four years with effect from 1 April 2009 (see V5.159C).

Extension of capping provisions to late claims for input tax

With effect from 1 May 1997, the three-year cap was extended by an amendment to SI 1995/2519, reg 29 to include, inter