The Law Lords have made a significant ruling that opens the door for companies to recover millions of pounds in VAT overpayments stretching back for decades.

The ruling has been widely welcomed, although companies who think they have a claim have been advised to submit it as soon as possible.

PKF Accountants said companies who believe they overpaid VAT at any point between 1973 and 1996 should consult their tax advisers and claim before HM Revenue & Customs “slams the door closed”.

PKF VAT partner Gerry Myton believes that there could be a six-month window of opportunity to submit a claim.

PKF is already pursuing claims for a number of UK motor dealers totalling some £10million.

Mr Myton said: "This ruling is hugely significant; overpayments of VAT before the introduction of the three year cap on December 4, 1996 (or  May 1, 1997 for certain claims) are still live.”

He said it is not too late to check records and submit claims. "VAT was introduced in 1973, so there are potential claims going back that far to be made.

"The only issue is whether calculations will be made on a compound basis as that will significantly increase the sums payable.

"HMRC will undoubtedly move to close this window as soon as possible.”

The Lords’ ruling related to a claim brought by two companies against HMRC after it refused to repay the VAT that the companies were entitled to recover, said Tony McClenaghan, head of indirect tax at Deloitte, which acted for one of the companies.

“The successful culmination of the litigation means that the company will finally receive the VAT which it is lawfully entitled to.

Mr McClenaghan said the ruling clearly has implications for other businesses.

“This will allow companies that have a claim against Her Majesty's Revenue and Customs (HMRC) to now make that claim stretching right back to 1973.

"We are talking a huge amount of money,” explained BVRLA spokesman Robin Mackonochie.

“They will only be getting back the money that is due to them.”

While the BVRLA could not yet confirm how many leasing companies will be entering a claim, Mr Mackonochie said it would be ‘a good number’ of its members.

It is understood that several large leasing companies had already made claims, which were dependent on the Lords’ ruling to be successful.

While leasing companies will benefit from the ruling, so will other companies in the motor industry.

“This is good news for motor dealers who have put claims in that missed the original deadline of June 30, 2003.

"These should now be paid on the basis of the judgment,” said National Franchised Dealers Association director Sue Robinson.

“Those few businesses eligible that have not yet made claims should do so as soon as possible, before HMRC put legislation in place to close this gap.”

The flow of information from HMRC about the case has been slow, with a spokesperson saying only that: “The three-year time limit for VAT claims still applies to tax periods starting on or after May 3, 1997.

"For earlier periods Government will repay claims that are properly due, once they have been verified by HMRC.”

However, she confirmed that HMRC will offer guidance for companies unsure about whether they have a valid claim.

HMRC also refused to confirm that the claims could amount to £1 billion, which is the figure being widely reported.

“It is too early to speculate on a figure.

"We have to wait for requests for repayments before we can give an accurate estimate.”