Most businesses, large or small, are beginning to feel the impact of the credit crunch.

However, there could be a ray of light on the horizon, and many businesses could be in line for a helpful VAT windfall thanks to a legal ruling - but they may not even be aware of their right to claim.

The ruling relates to how businesses go about claiming back any VAT overpaid.

HM Revenue and Customs (HMRC) had previously decided that claims could only be made relating to amounts owed from the last three years. However, a new ruling in Europe has meant that the way in which the three year cap was introduced was actually contrary to EU law, and companies can now make claims dating back to the 1970s.

This is a long time for any business, but particularly for one that may have been overpaying VAT all this time without realising it. However, there is a catch. The window for submissions closes in March next year, and the process for claiming VAT back is extremely complicated.

Under the ruling, businesses can go back to the earliest of 1 April 1973 or the date on which they first registered for VAT and reclaim: input tax (i.e. VAT charged by suppliers to a business) not claimed but due for periods up to and including 1 May 1997; and output tax (i.e. VAT charged by a business to its customers) overpaid or overdeclared for periods up to 4 December 1996.

When HMRC introduced the three year cap on VAT claims a number of large UK traders decided to take them on in court, pursuing their claims to the EU courts. As a result, HMRC was forced to announce a transitional period for submission of claims, rather than just introducing the three year rule with hardly any warning.

It's not often that, here in the UK, anybody will say "thank goodness for the EU", but currently the timing could not be better for the business community. Certainly, many businesses may find that, if they can claim, it may only be for small amounts. But it is important to remember that in the current economic climate, every bit helps and it is important to take action and claim back what is rightfully owed.

However, many businesses I have spoken to are not even aware of their rights and it is important to act now to safeguard your entitlement.

Reclaims will be paid subject to statutory interest, and I have already negotiated substantial refunds for a number of clients.

Any business which thinks they have a claim should contact their accountant for further information.