In HMRC v Investment Trust Companies (in liquidation) [2017] UKSC 29 the Supreme Court concluded that where HMRC have erred in VAT law, only the business who paid HMRC erroneous VAT can claim it back.

  • The Investment Trust Companies (ITCs) were charged for services by Investment Managers (IMs).
  • These services were treated as standard rated in accordance with domestic law.
  • IMs paid the VAT, less input VAT, to HMRC.
  • It was found that HMRC had not transposed EU law correctly and these services should be exempt.
  • IMs successfully recovered VAT and interest from HMRC to the extent it was not time-barred.
  • The refund was equal to the net amount of VAT paid by the IMs as they would not be entitled recover VAT if all services were exempt.
  • The IMs agreed with HMRC to repay the net VAT to the ITCs as a condition of the refund.
  • The ITCs made an unjust enrichment claim against HMRC:
    • They had only received the ‘net’ VAT that the IMs had recovered from HMRC
    • This meant they had not recovered the full amount of VAT that had been unlawfully levied by HMRC.
    • HMRC should be liable for the total VAT paid by the ITCs , not just the VAT net of IMs input VAT.
    • The ITCs also took the view that the amount that HMRC owed to them was not time barred.

The Supreme Court found:

  • Economically speaking, HMRC had been unjustly enriched at the expense of the ITCs. 
  • In reality
    • The IMs were unjustly enriched at the expense of the ICTs
    • HMRC were unjustly enriched at the expense of the IMs.
  • They could not collapse two transactions into one.
  • ITCs claim was against the IMs.
  • ITCs as the end-user, could not claim directly against HMRC.
  • The ITCs claim is time-barred.

Links

VAT reclaims and unjust enrichment

Correcting VAT errors

External link: HMRC v Investment Trust Companies (in liquidation) [2017] UKSC 29


 

Wouldn’t it be great and think how much TIME it would SAVE you if someone:

  • READ all the latest tax news, case decisions, new legislation and articles in tax and then summarised them for you?
  • Only alerted you to things that are RELEVANT to you?

How about if that someone also:

  • Updated those summaries in REAL TIME for you
  • ADDED examples, planning points, toolkits and calculators, and
  • Linked all that information together and also provided you with CPD?

Thousands of firms of accountants and advisers are already using www.rossmartin.co.uk as their primary TAX resource.

At a cost of just £1 per day, it’s a no brainer: FREE up your MIND and your TIME (and your wallet).

And...we run our Virtual Tax Partner support service, if you need assistance with a particular query or technical issue.

Squirrel advert

Loving our content? 😍
Sign up Now!
For free tax news, cases,
discounts & special tax briefings

We hope you are enjoying this amazing Practical Tax Database here at www.rossmartin.co.uk.

 

.