The ECJ has ruled in the case Banca Antoniana Popolare Veneta (BAPV)(C-427/10) that the normal time limits for a supplier to claim a refund of VAT overpaid to tax authorities could be extended under certain conditions.

The case involved a change of VAT treatment of a supply of services, where the treatment was thought initially to be taxable (and VAT was paid over to the tax authorities), but was retroactively regarded as exempt.

BAPV’s customers brought proceedings against them for repayment of the VAT and their claims were admissible due to the period of limitation in Italy being ten years for such claims.

However, BAPV were unable to recover the VAT they had paid over to the authorities, due to a limitation on such claims in Italy being two years.

According to the ECJ ruling, a supplier should not be financially disadvantaged because of errors by tax authorities which he cannot control. Therefore if the sum a supplier must reimburse his customers is more than he can claim from the authorities (due to more generous civil law time limits for customers than those open to suppliers), then the VAT time limits for suppliers should be extended to ensure parity in the amounts recovered by both parties.

In the UK, the civil law time limit for customer claims for reimbursement for commercial loss is six years, whereas the VAT time limits to claim back overpaid VAT from HMRC is four years.

So, there is a likelihood that at some stage the UK may see the VAT time limit challenged again with a view to matching the civil law time limit.