Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

The clause provides for the extension of the defence of unjust enrichment by the Revenue and Customs to all claims for VAT credit where the tax has been overcharged and over-accounted for in error. Under the existing law, the defence is available only where claims are made for repayment of VAT that was overpaid but was not due. Inevitably, the time limit for such claims begins to run from the date the tax is overpaid, whereas the time limit for correcting errors for the Revenue and Customs to assess in respect of under-declared VAT runs from the end of the prescribed accounting period in which the error occurred.

Where VAT has been charged in error, clause 3 marks a shift from claims being made for repayment of overpaid VAT to claims being made for a credit of VAT that has wrongly been accounted for. The clause aims to ensure that there is consistency and simplicity for the taxpayer as to when the three-year time limit runs from. Having broken the link with payments, it is sensible for the three-year period to run from the end of the prescribed accounting period in which the   accounting error was made. Accordingly, that is what the clause does.

Unfortunately, the amendment fails to define from which prescribed accounting period the three years should run and fails to take account of the existing three-year limitation period on the correction of errors and the three-year limitation period that the Revenue and Customs has for assessing under-declared tax. The amendment is therefore not justified. I understand how difficult it is to draft amendments to the Finance Bill. I think that the hon. Gentleman was looking for consistency by ensuring that the same rule applied and that the three years started at the same point. Unfortunately, the amendment cannot be justified because it does not do that. It makes sense for all statutory means of error correction to be subject to the same time limit, and that is what the clause does.

I reassure the hon. Gentleman that businesses will know clearly about the time period; it will be the same period from the same starting point, and that is wholly justified where we are ensuring that the defence of unjust enrichment is covering all areas and time periods.

I hope that the hon. Gentleman will accept that this is a probing amendment and will withdraw it. If he feels unable to do so, I will regrettably have to ask my hon. Friends to oppose it.

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