In Birmingham Hippodrome Theatre Trust Ltd v HMRC [2014] EWCA Civ 684, the company (BH) historically overpaid VAT on admission costs to its theatres on the basis that the UK failed to implement an exemption from VAT for cultural services. BH had not initially pursued its claim for overpaid VAT in 2004 because it had also claimed input tax on capital expenditure under the same mistake of law, albeit in relation to a different accounting period. Following the decision in Fleming/Condé Nast, BH to tried to revisit its claim for overpaid VAT, whilst avoiding the consequence of having it extinguished by the subsequent unjustified input tax recovery. HMRC was allowed to set off taxes owed across accounting periods: taxpayers have to ‘take the rough with the smooth’.
