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C7: VAT Claims

Claim for overstated or overassessed tax

Claim for overstated or overassessed tax

 

Overstated output tax

"(1)     Where a person—

(a)     has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and

(b)     in doing so, has brought into account as output tax an amount that was not output tax due,

the Commissioners shall be liable to credit the person with that amount." (VATA 1994, s.80(1))

Subsequent reduction in price does not result in an overpayment of VAT in the earlier period

 

“Both sides, as we understand their positions, consider that the subsequent reduction in price in a later accounting period does not result in there being an overpayment of VAT or an over-accounting of output tax in the earlier period. We proceed on the same basis although we should not be taken as deciding that it is correct.” (HMRC v. Iveco Limited [2016] UKUT 263 (TCC), §18, Warren J and Judge Sinfield).

Overassessed output tax

"(1A)     Where the Commissioners—

(a)     have assessed a person to VAT for a prescribed accounting period (whenever ended), and

(b)     in doing so, have brought into account as output tax an amount that was not output tax due,

they shall be liable to credit the person with that amount." (VATA 1994, s.80(1A))

"This allows traders to claim amounts paid pursuant to assessments for output tax where the assessment turns out to be for an amount that was not due as output tax.
That includes the situation where a taxable person discloses an amount as being an under-declaration of output tax, we make an assessment for that amount which is paid and it later turns out that the disclosure was wrong.
For example, if a taxable person, who has been treating his supplies of widgets as exempt of VAT, is assessed for output tax on those supplies and it later turns out that he was treating them correctly, he can make a claim to recover the amount he paid pursuant to that assessment.
This applies equally where HMRC makes the assessment as a result of a disclosure made by the taxable person." (VRM6000)

Other overpaid tax

"(1B)     Where a person has for a prescribed accounting period (whenever ended) paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as a result of—

(a)     an amount that was not output tax due being brought into account as output tax, or

(b)     an amount of input tax allowable under section 26 not being brought into account,

the Commissioners shall be liable to repay to that person the amount so paid." (VATA 1994, s.80(1B))

"This allows traders to recover amounts
of output tax that have been overpaid, for example, as a result of a return being paid twice
paid on assessments for amounts thought to have been incorrectly deducted as input tax.
For example, HMRC make an assessment against a taxable person on the grounds that he has deducted too much input tax and the taxable person pays that assessment. If, within the statutory time limits, it turns out that the assessment was wrong and that the taxable person ought not to have paid it, he can make a claim to recover the amount he paid on the assessment.
This subsection essentially covers all overpayments of VAT that are not covered by subsections (1) and (1A) of section 80 or by regulation 29 of the VAT Regulations 1995.
Claims under this subsection cannot be refused on the grounds of unjust enrichment." (VRM6000)

Claim must be made

"(2)     The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose." (VATA 1994, s.80(2))

HMRC to repay amount due after set off

"(2A)     Where—

(a)     as a result of a claim under this section by virtue of subsection (1) or (1A) above an amount falls to be credited to a person, and

(b)     after setting any sums against it under or by virtue of this Act, some or all of that amount remains to his credit,

the Commissioners shall be liable to pay (or repay) to him so much of that amount as so remains." (VATA 1994, s.80(2A))

No further claim for period where earlier claim based on the same grounds withdrawn/unsuccessful

 

"[132] Where a trader appeals only the amount of the assessment, and then withdraws the appeal, the decision under appeal must have related only to quantum.  Section 85(4) provides that on a withdrawal, the parties are deemed to have agreed that the decision under appeal should be upheld without variation, in other words, that the quantum of that assessment was correct. By  s 85(1), the Tribunal is therefore deemed to have determined that the quantum was correct.  

[133] However, where a person has appealed only against something other than quantum, the appeal is not about “the amount of such an assessment”, but about the reasons for making the assessment.  When such an appeal is withdrawn, the decision upheld without variation is HMRC’s decision to assess the trader to VAT, and that must import the reasons for that decision. 

[134] In this case the Assessment was made on the basis of figures provided to Mr Boobyer by Mr Vey, see §21, so its quantum was not in dispute. The Appellant instead appealed against HMRC’s decision that input tax on the investment management services for the periods 08/12 to 05/14 was not allowable.  When the appeal was withdrawn, it was that decision which was deemed to have been agreed without variation and was then deemed to have been determined by the Tribunal.

...

[141] I agree with [HMRC].  There is no good reason why Parliament would have intended to prevent relitigation where the parties have come to an agreement on a matter which is under appeal, but opened the gates to relitigation where the appellant had simply withdrawn the appeal without reasons.

...

[149] For the reasons set out above, I find that:

(1) the Assessment was issued under s 73(1) and in accordance with HMRC’s best judgement, it was made on the basis that input tax on the investment management services for the periods 11/10 to 05/14 was not allowable.

(2) the Appellant appealed against the Assessment under s 83(1)(p) on the grounds that the input tax was allowable, there was no dispute about quantum;  

(3) the Appellant withdrew the appeal under s 85, the purpose of which is to prevent relitigation; and

(4) the Appellant was deemed by s 85 to have come to an agreement with HMRC that input tax on the investment management services for the periods 11/10 to 05/14 was not allowable and the Tribunal was deemed to have determined that this was the case." (Telent Technology Services Limited v. HMRC [2022] UKFTT 147 (TC), Judge Redston)

No further claim for period where earlier claim based on the same grounds withdrawn/unsuccessful

Repayment of amount shown on invoice recoverable as VAT

 

“It is certainly quite unacceptable for a Member State to charge tax or “equivalent VAT” under its domestic version of Article 21.1.c. and to refuse refunds of that in all circumstances. For instance if, to take an extreme case, the invoice was issued as an honest mistake, the acquirer claimed or retained no input tax deduction, and the issuer re-invoiced the acquirer without VAT, any tax once charged had to be refunded…It is equally unacceptable for the domestic taxing authority to have a discretion as to when to refund and when not to refund…The single test that we consider to be the most important to emerge from the various cases is the proposition that if the issuer of the invoice has done everything in time to enable the transaction to be reversed, such that there is no ultimate breach of neutrality, then any tax initially charged should be refunded.” (St Martin’s Medical Services Ltd v. HMRC [2012] UKFTT 485 (TC), §106 – on the facts HMRC had missed the time limit to assess overclaimed input tax by a related party as a result of a failed tax avoidance scheme, but that was not sufficient to prevent the appellant reclaiming overpaid overpaid output VAT (or what was shown as output VAT on the invoices))." (St Martin’s Medical Services Ltd v. HMRC [2012] UKFTT 485 (TC))

Claims are made under section 80

“…since the ECJ has made it clear that in some circumstances the person liable under paragraph 5(2) must have a right to recover the amount owed, that right can only be under section 80. Section 80 must thus be read consistently with this requirement. It certainly involves (as we conceded in paragraph 101 above) applying a different test in granting refunds than the test that obviously governs the refund of “VAT proper”. But there is considerable guidance by the ECJ as to the tests that we should apply. Our decision is that Services’ appeal is and can only be made under section 80; that we must deal with that appeal, for which we have jurisdiction, in accordance with the guidance given to us by the ECJ, and that is what we have done in reaching our conclusion…” (St Martin’s Medical Services Ltd v. HMRC [2012] UKFTT 485 (TC), §119)

FTT has jurisdiction over VAT equivalent liability reclaim

As a result of the claims being made under s.80, the FTT has jurisdiction under s.83(1)(t).

“HMRC did, however, concede that we had jurisdiction under section 83(1)(t) to hear an appeal for the recovery of an amount claimed under section 80, and the Appellant’s contention was that their claim was indeed made under section 80 such that we did have jurisdiction…We accept that Services’ claim is indeed properly made under section 80.” (St Martin’s Medical Services Ltd v. HMRC [2012] UKFTT 485 (TC), §§117…118)

Repayment of amount shown on invoice recoverable as VAT

Exclusive regime

 

"(7)     Except as provided by this section (and paragraph 16I of Schedule 3B and paragraph 29 of Schedule 3BA), the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them." (VATA 1994, s.80(7))

"[22] In section 80, Parliament has thus created a specific remedy for taxpayers who have overpaid VAT, but has done so subject to limitations, including those set out in subsections (3) and (4). Those limitations would have no equivalent in a common law claim, and would therefore be defeated if it were possible for the taxpayer, or his customers, to bring such a claim. Parliament cannot have intended the special regime in section 80 to be capable of circumvention in that way.

[23] That is reflected in section 80(7), which provides that HMRC shall not be liable to repay an amount paid to them by way of VAT on the ground that it was not due, “except as provided by this section”. In the light of section 80(3) and (4), this court concluded in Investment Trust Companies that section 80(7) should be construed as excluding non-statutory claims by customers, as well as taxpayers (as was conceded), which might otherwise lie against HMRC in circumstances falling within the scope of section 80." (HMRC v. Littlewoods Limited [2017] UKSC 70)

Exclusive regime

Judicial review claim to force HMRC to pay customer rather than insolvent supplier

“[HMRC] is proposing to repay the VAT to [the insolvent supplier] in administration (which never bore the burden of that VAT and from whom the Claimant will be unable to recover the full amount of VAT unduly invoiced) while at the same time proposing to enforce assessments against the Claimant for the input VAT which it deducted…What is critical is that if the Claimant tried to sue [the insolvent supplier] it could only recover a proportion of what was owed… In my judgment for the reasons I have given this claim succeeds…The Claimant is entitled to an order that the following input tax assessments raised by HMRC pursuant to section 73 of VATA and notified to Premier be quashed…” (R (oao Premier Foots (Holdings) Ltd v. HMRC [2015] EWHC 1483 (Admin), §§4…21…25…26).
 

Judicial review claim to force HMRC to pay customer rather than insolvent supplier

Form of claim

 

Overpaid output VAT: in writing, stating the amount of the claim and the method by which that amount is calculated
 

"Any claim under section 80 of the Act shall be made in writing to the Commissioners and shall, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated." (SI 1995/2518, r.37)

“For the reasons of certainty given above we consider that it is only where a demand for payment or the assertion of a right to repayment satisfies regulation 37 that it is to be treated as a claim pursuant to section 80. Priory’s letter dated 18 September 2006 did not satisfy those requirements and therefore did not amount to a claim under section 80." (Websons (8) Ltd v. HMRC [2013] UKFTT 229 (TC), §52).

HMRC provide form 652 for this purpose, but it is optional

 

Websons (8) Ltd v. HMRC [2013] UKFTT 229 (TC), §28)
 

Implicit requirement for reasons why claim is being made

 

“We agree with Judge Mosedale that s 80 and reg 37 carry with them an implicit requirement that a claimant should provide reasons sufficient to enable HMRC to understand why the claim has been made.” (HMRC v. Vodafone Group Services Limited [2016] UKUT 89 (TCC), §56, Warren J and Judge Bishopp).

 

Inchoate claim promising further detail not a claim

 

“There is no room within reg 37 for a claim to be made, without the specification of an amount or the method of calculation, but upon the basis that they will be provided later. We agree with Judge Berner that Roth J did not decide the contrary 30 in Reed Employment, but was instead focusing on the character of an amendment rather than on the validity or otherwise of the original claim. To have said what he did in the context of the validity of the original claim would have been inconsistent with the decision of the Court of Appeal in BSOC.” (HMRC v. Bratt Auto Contracts Ltd [2016] UKUT 90 (TCC), §37, Warren J and Judge Bishopp).

Form of claim

Claim must be for a single specific prescribed accounting period

 

"[27] I agree with Roth J that the formal requirements of a claim are those contained in regulation 37. However, as I have explained, regulation 37 and section 80 have to be read together so as to give "claim" and "amount" a consistent meaning throughout. A claim under section 80 is not any demand for repayment of overpaid tax, but is a demand for repayment of overpaid output tax for a prescribed accounting period which is not output tax due. Thus I would not agree that a claim under section 80 "may relate to one accounting period or many". A taxpayer may, in the same letter, raise a number of different claims, each by reference to an accounting period, but multiple such claims in the same letter are not, in my judgment, correctly referred to as a single claim under section 80. That distinction did not matter for the purposes of Reed, but is of importance in the present appeal. In any event, Roth J did not go so far as to suggest that a claim could be made, as here, without reference to any accounting period at all." (Bratt Autoservices Company Ltd v. HMRC [2018] EWCA Civ 1106, Floyd LJ)

“Thus although, as Roth J said in Reed Employment, it is possible to make claims relating to several prescribed accounting periods, by sending a letter or by voluntary disclosure, the taxpayer must comply with sub-s 80(6) and reg 37 in respect of each period. Even if the overall claim relates to several prescribed accounting periods a separate claim must be made for each such period, identifying that period, the amount for which repayment is sought and the method by which it has been calculated…we agree with Mr Hill that there is a purpose to the allocation of the amounts claimed to accounting periods, in part because of the impact on the calculation of any interest might be due but more particularly because of the manner in which the question whether the time limit has expired must be determined” (HMRC v. Bratt Auto Contracts Ltd [2016] UKUT 90 (TCC), §§37…42, Warren J and Judge Bishopp).

Simple time apportionment may be acceptable as long as amount for each period identified

 

“It may be that it is impossible to make a precise calculation allocating an exact amount of tax to each of the prescribed accounting periods to which the overall claim refers. We would not, therefore, see any objection to a calculation which, for example, arrived at a figure for a whole year and then apportioned it equally to the accounting periods within that year. Indeed, such an approach would amount to 35 compliance with reg 37 since equal apportionment, whether or not truly justified by the circumstances, does represent an element of calculation.” (HMRC v. Bratt Auto Contracts Ltd [2016] UKUT 90 (TCC), §41, Warren J and Judge Bishopp).

Mistaken belief of monthly prescribed accounting periods may not invalidate claim

"[33]...[The taxpayer] also gave the example of a taxpayer who mistakenly made his "claims" by reference to periods of one month, when he should have used three month periods, and suggested that it would be unjust if such a claim were to fail at the outset. [HMRC] did not accept that such a claim would so fail, however, as he conceded that it would usually be apparent from the claim at the outset what the amounts for each prescribed period would be. I think [HMRC] is right, and so this example does not assist the taxpayer either." (Bratt Autoservices Company Ltd v. HMRC [2018] EWCA Civ 1106, Floyd LJ)

Claim must be for a single specific prescribed accounting period

Method of calculation

Method of calculation without statement of amount insufficient

“We also agree with him that what BAC provided in support of its Elida Gibbs claim was insufficient. Although a proposed method of calculation was identified, no amount was even hinted at.” (HMRC v. Bratt Auto Contracts Ltd [2016] UKUT 90 (TCC), §39, Warren J and Judge Bishopp).

Method of calculation: no extra requirement that the method be reasonably understandable 

 

“At [21] Judge Berner expressly disagreed with those comments [in Nathaniel v. HMRC [2010] UKFTT 472 (TC) that there must be sufficient information as to the method to enable a reasonably competent VAT officer to understand it], making the point that the objective test to which the F-tT had referred imposed a hurdle which reg 37 did not contain…We should add for completeness that we agree with what Judge Berner said in relation to reg 37 and Nathaniel & Co in [20] and [21] of his decision.” (HMRC v. Bratt Auto Contracts Ltd [2016] UKUT 90 (TCC), §§17…38, Warren J and Judge Bishopp).

Method of calculation

Protective claims must still satisfy formalities

A protective claim is one that satisfies the relevant formalities but whose success depends upon the outcome of outstanding litigation.

“Mr Haley submitted that the term protective claim in this context was used to indicate a claim which satisfied regulation 37 but where the maker was unsure whether it would succeed or not, for example because of outstanding litigation. The claim was made in anticipation that it would not be accepted or rejected by HMRC until the outstanding litigation was concluded…We also note that the FtT and the Upper Tribunal in Reed Employment were dealing with what the FtT described at [7] as a “protective claim”. However it seems to us that all these references to protective claims in the context of section 80 are used in the sense described by Mr Haley. There is no statutory provision or regulation which gives effect to a claim which does not satisfy regulation 37.” (Websons (8) Ltd v. HMRC [2013] UKFTT 229 (TC), §§49…50).
 

Protective claims must still satisfy formalities

Claim for input tax

 

To be made in return for prescribed accounting period in which it was chargeable

"(1)     Subject to paragraph (1A) below, and save as the Commissioners may otherwise allow or direct either generally or specially, a person claiming deduction of input tax under section 25(2) of the Act shall do so on a return made by him for the prescribed accounting period in which the VAT became chargeable save that, where he does not at that time hold the document or invoice required by paragraph (2) below, he shall make his claim on the return for the first prescribed accounting period in which he holds that document or invoice." (SI 1995/2518, r.29(1))

Unless necessary evidence not held

See (SI 1995/2518, r.29(1)), above.

Time limit: 4 years from deadline for return for first period in which input could have been claimed

"(1A)     Subject to paragraph (1B) the Commissioners shall not allow or direct a person to make any claim for deduction of input tax in terms such that the deduction would fall to be claimed more than 4 years after the date by which the return for the first prescribed accounting period in which he was entitled to claim that input tax in accordance with paragraph (1) above is required to be made." (SI 1995/2518, r.29(1A), paragraph (1B) deals with returns before April 2006)

Necessary evidence

"(2)     At the time of claiming deduction of input tax in accordance with paragraph (1) above, a person shall, if the claim is in respect of—

(a)     a supply from another taxable person, hold the document which is required to be provided under regulation 13;

(b)     a supply under section 8(1) of the Act, hold the relative invoice from the supplier;

(c)     an importation of goods, hold a document authenticated or issued by the proper officer, showing the claimant as importer, consignee or owner and showing the amount of VAT charged on the goods;

(d)     goods which have been removed from warehouse, hold a document authenticated or issued by the proper officer showing the claimant's particulars and the amount of VAT charged on the goods;

(e)     an acquisition by him from another member State of any goods other than a new means of transport, hold a document required by the authority in that other member State to be issued showing his registration number including the prefix “GB”, the registration number of the supplier including the alphabetical code of the member State in which the supplier is registered, the consideration for the supply exclusive of VAT, the date of issue of the document and description sufficient to identify the goods supplied; or

(f)     an acquisition by him from another member State of a new means of transport, hold a document required by the authority in that other member State to be issued showing his registration number including the prefix “GB”, the registration number of the supplier including the alphabetical code of the member State in which the supplier is registered, the consideration for the supply exclusive of VAT, the date of issue of the document and description sufficient to identify the acquisition as a new means of transport as specified in section 95 of the Act;

provided that where the Commissioners so direct, either generally or in relation to particular cases or classes of cases, a claimant shall hold or provide such other evidence of the charge to VAT as the Commissioners may direct." (SI 1995/2518, r.29(2))

HMRC's discretion to allow other evidence

See (SI 1995/2518, r.29(2)), above.

Use of estimated figures

"(3)     Where the Commissioners are satisfied that a person is not able to claim the exact amount of input tax to be deducted by him in any period, he may estimate a part of his input tax for that period, provided that any such estimated amount shall be adjusted and exactly accounted for as VAT deductible in the next prescribed accounting period or, if the exact amount is still not known and the Commissioners are satisfied that it could not with due diligence be ascertained, in the next but one prescribed accounting period." (SI 1995/2518, r.29(3))

No double deduction

"(4)     Nothing in this regulation shall entitle a taxable person to deduct more than once input tax incurred on goods imported or acquired by him or on goods or services supplied to him." (SI 1995/2518, r.29(4))

Claim for input tax

Claim for repayment of VAT by third country traders not making UK supplies

 

Right to claim

"Subject to the other provisions of this Part a trader shall be entitled to be repaid VAT charged on goods imported by him into the United Kingdom in respect of which no other relief is available or on supplies made to him in the United Kingdom if that VAT would be input tax of his were he a taxable person in the United Kingdom." (SI 1995/2518, r.186)

HMRC entitled to require appointment of VAT representative

"The Commissioners may, as a condition of allowing a repayment under this Part, require a trader to appoint a VAT representative to act on his behalf." (SI 1995/2518, r.187)

Country of establishment must have reciprocal arrangement

"(1)     Save as the Commissioners may otherwise allow, a trader to whom this Part applies who is established in a third country having a comparable system of turnover taxes will not be entitled to any refunds under this Part unless that country provides reciprocal arrangements for refunds to be made to taxable persons who are established in the United Kingdom." (SI 1995/2518, r.188(1))

 

Trader must not make supplies in the UK

"(2)     This Part shall apply to any trader but not if during any period determined under regulation 192—

(a)     he was established in any of the member States of the European Community, or

(b)     he made supplies in the United Kingdom of goods or services other than—

(i)     transport of freight outside the United Kingdom to or from a place outside the United Kingdom or services ancillary thereto,

(ii)     services where the VAT on the supply is payable solely by the person to whom they are supplied in accordance with the provisions of section 8 of the Act, and

(iii)     goods where the VAT on the supply is payable solely by the person to whom they are supplied." (SI 1995/2518, r.188(2))

Input must not relate to intended supplies in the UK or export from the UK 

"This Part applies to any supply of goods or services made in the United Kingdom or to any importation of goods into the United Kingdom on or after 1st July 1994 but does not apply to any supply or importation which—

(a)     the trader has used or intends to use for the purpose of any supply by him in the United Kingdom, or

(b)     has been exported or is intended for exportation from the United Kingdom by or on behalf of the trader." (SI 1995/2518, r.189)

Excluded credits

"(1)     The following VAT shall not be repaid—

(a)     VAT charged on a supply which if made to a taxable person would be excluded from any credit under section 25 of the Act,

(b)     VAT charged on a supply to a travel agent which is for the direct benefit of a traveller other than the travel agent or his employee,

(c)     VAT charged on a supply used or to be used in making supplies of a description falling within article 3 of the Value Added Tax (Input Tax) (Specified Supplies) Order 1999.

(2)     In this regulation a travel agent includes a tour operator or any person who purchases and resupplies services of a kind enjoyed by travellers." (SI 1995/2518, r.190)

Method of claiming

"(1)     A person claiming a repayment of VAT under this Part shall—

(a)     complete in the English language and send to the Commissioners either the form specified in a notice published by the Commissioners, or a like form produced by any official authority, containing full information in respect of all the matters specified in the said form and a declaration as therein set out, and

(b)     at the same time furnish—

(i)     a certificate of status issued by the official authority of the third country in which the trader is established either on [the form specified in a notice published by the Commissioners or on a like form produced by the official authority, and

(ii)     such documentary evidence of an entitlement to deduct input tax as may be required of a taxable person claiming a deduction of input tax in accordance with the provisions of regulation 29.

(2)     Where the Commissioners are in possession of a certificate of status issued not more than 12 months before the date of the claim, the claimant shall not be required to furnish a further such certificate.

(3)     The Commissioners shall refuse to accept any document referred to in paragraph (1)(b)(ii) above if it bears an official stamp indicating that it had been furnished in support of an earlier claim." (SI 1995/2518, r.191)

Time limit for claiming

"(1)     A claim shall be made not later than 6 months after the end of the prescribed year in which the VAT claimed was charged and shall be in respect of VAT charged on supplies or on importations made during a period of not less than 3 months and not more than 12 months, provided that a claim may be made in respect of VAT charged on supplies or on importations made during a period of less than 3 months where that period represents the final part of the prescribed year.

(2)     No claim shall be made for less than £16.

(3)     No claim shall be made for less than £130 in respect of VAT charged on supplies or on importations made during a period of less than the prescribed year except where that period represents the final part of the prescribed year." (SI 1995/2518, r.192)

Payment reduced for bank charges incurred

"Where any repayment is to be made to a claimant in the country in which he is established, the Commissioners may reduce the amount of the repayment by the amount of any bank charges or costs incurred as a result thereof." (SI 1995/2518, r.193)

Correcting erroneous claims

See G8: VAT assessments

Offset against future claims

"Where any sum has been repaid to a claimant as a result of an incorrect claim, the amount of any subsequent repayment to that claimant may be reduced by the said sum." (SI 1995/2518, r.197)

HMRC power to refuse subsequent claims if false documents relied on

"If any claimant furnishes or sends to the Commissioners for the purposes of this Part any document which is false or which has been altered after issue to that person the Commissioners may refuse to repay any VAT claimed by that claimant for the period of 2 years from the date when the claim in respect of which the false or altered documents were furnished or sent, was made." (SI 1995/2518, r.196)

Claim for repayment of VAT by third country traders not making UK supplies

Claims by DIY builders

 

"A claimant shall make his claim in respect of a relevant building by—

(a)     furnishing to the Commissioners no later than 3 months after the completion of the building [the relevant form for the purposes of the claim]1 containing the full particulars required therein, and

(b)     at the same time furnishing to them—

(i)     a certificate of completion obtained from a local authority or such other documentary evidence of completion of the building as is satisfactory to the Commissioners,

(ii)     an invoice showing the registration number of the person supplying the goods, whether or not such an invoice is a VAT invoice, in respect of each supply of goods on which VAT has been paid which have been incorporated into the building or its site,

(iii)     in respect of imported goods which have been incorporated into the building or its site, documentary evidence of their importation and of the VAT paid thereon,

(iv)     documentary evidence that planning permission for the building had been granted, and

(v)     a certificate signed by a quantity surveyor or architect that the goods shown in the claim were or, in his judgement, were likely to have been, incorporated into the building or its site." (SI 1995/2518, r.201)

Relevant form

"The relevant form for the purposes of a claim is—

(a)     form VAT 431NB where the claim relates to works described in section 35(1A)(a) or (b) of the Act; and

(b)     form VAT 431C where the claim relates to works described in section 35(1A)(c) of the Act." (SI 1995/2518, r.201)

Claims by DIY builders

Claim for interest

 

"(10)     The Commissioners shall only be liable to pay interest under this section on a claim made in writing for that purpose." (VATA 1994, s.78(10))

See further S2: Interest to taxpayer​

Claim for interest

Meaning of claim: demand for something as due 

 

See C1: Direct tax claims in general

Single or multiple claims 


“There is no definition of ‘claim’ in VATA, nor any provision for amendment of a claim. The starting point, therefore, we think is that any assertion of a right to repayment must be regarded as an individual, discrete claim, separate from any other, unless it is shown to be in essence as one with an earlier claim.” (Reed Employment Ltd v. HMRC [2011] UKFTT 200 (TC), §110).

Meaning of claim: demand for something as due 

Provisional claims

 

Query whether provisional claim can be made that does not specify an amount and a method of calculation

 

“Nor is this conclusion in any way unfair. Paragraph 33 of Roth J.’s judgment in Reed gives a very clear example of how a taxpayer who wished to make a claim, but was temporarily unable to calculate the full figures and provide the necessary documentation required by regulation 37 VATR, could legitimately make a claim, indicate that he was searching for the documents, and then amend that extant claim to supply a final calculation by reference to the supporting documents at a later date.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §37, Snowden J).

 

But:

 

“There is no room within reg 37 for a claim to be made, without the specification of an amount or the method of calculation, but upon the basis that they will be provided later. We agree with Judge Berner that Roth J did not decide the contrary 30 in Reed Employment, but was instead focusing on the character of an amendment rather than on the validity or otherwise of the original claim. To have said what he did in the context of the validity of the original claim would have been inconsistent with the decision of the Court of Appeal in BSOC.” (HMRC v. Bratt Auto Contracts Ltd [2016] UKUT 90 (TCC), §37, Warren J and Judge Bishopp).
 

Provisional claims

Proving a claim (including historic claims)

Proving a claim (including historic claims)

Form of claim

 

"(6)     A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases." (VATA 1994, s.80(6))

- Must prove how much is due to T (not simply that some amount is due)

"[60] The taxpayer’s obligation is to prove how much it is entitled to claim, not merely that it must have incurred some input tax in the course of its business activity. 

...

[63]...That does not detract from the force of the point emerging from Vădan and Zipvit that proof of the amount of input tax incurred by whatever documentation the tax authority requires is a precondition of the right to deduct that or any amount - there is no theoretical right to deduct which the taxpayer can assert." (HMRC v. NHS Lothian Health Board [2022] UKSC 28)

- Must prove how much is due to T (not simply that some amount is due)

- Historic claims: burden on claimant 
 

"[64] It follows that the Inner House was wrong to approach the appeal on the basis that because NHS Lothian must have incurred some input tax, the FTT’s task was to decide which was more likely: that NHS Lothian’s claim was right or that no input tax or a much smaller amount of input tax was deductible. Any such principle would be inconsistent with the PVD which places on the taxpayer the burden of proving that input tax has been incurred. The Inner House’s approach would mean that once the taxpayer can show that it bought at least some goods and services for use in at least some business activity then HMRC must accept the claim to deduct whatever amount of input tax the taxpayer puts forward unless they can establish that either no input tax was paid or no business activity carried on. That approach is inconsistent with the PVD and with the CJEU’s decision in Vădan. Mr Vădan had clearly incurred some input tax in constructing his buildings but it was not suggested by the CJEU that his claim should prevail in the absence of proof as to the amount of that tax." (HMRC v. NHS Lothian Health Board [2022] UKSC 28)

 

 “In our view, it falls to [the appellant] to make good its case that it has a valid claim. A claim for previously recovered input tax is simply not a valid claim…It is for HMRC to satisfy itself that the claim is valid on the basis of the evidence produced by the taxpayer and any other information available to it. But it does not fall to HMRC to prove whether the taxpayer has already received full value for the claim which it is now making.” (Perenco Holdings v. HMRC [2015] UKFTT 0065 (TC), §97).

 

“However, we are mindful that the burden of proof throughout rests on the appellant.  It has to demonstrate the robust nature of its calculations.” (NHS Dumfries & Galloway Health Board v. HMRC [2014] UKFTT 242 (TC), §50, Judge Mure QC).  
 

- Historic claims: burden on claimant 

Historic claims: there must be sufficient evidence to estimate with reasonable certainty

 

"[65] The FTT was therefore entitled to conclude that it is not enough for a taxpayer to show that it has engaged in business activity and has bought supplies for which it was charged VAT. The taxpayer must present either the specified documents showing the amount of input tax incurred or devise a credible alternative method by which that amount can be estimated by HMRC with reasonable certainty that the amount now being claimed was at least close to the amount that had in fact been incurred." (HMRC v. NHS Lothian Health Board [2022] UKSC 28)

“I am also clear that the FTT did not misdirect itself as to its jurisdiction. It proceeded on the basis that in demonstrating that an amount was due reasonable and sustainable estimation or approximation by the appellant might be legitimate. It approached the appeal - correctly - on the basis that it was for the appellant to satisfy it on the balance of probabilities that the appellant was entitled to repayment of an amount of input tax.” (NHS Greater Glasgow and Clyde Health Board v. HMRC [2017] UKUT 19 (TCC), §27, Lord Doherty).

 

“In all cases the standard of proof remains the balance of probabilities: that applies equally to historic claims for unrecovered input tax. There is no rule of law or procedure restricting the exercise of the right of recovery in such cases; proof by means of estimates, assumptions and extrapolations was open to it as it is in all cases. The problem for the appellant was that the Tribunal was not satisfied that the material placed before it was of sufficient value to enable any reliable conclusions to be drawn, whether by way of estimation, assumption, extrapolation or otherwise. Section 121 re-opened entitlement to make repayment claims potentially going back to 1973, but it did not purport to address any of the practical difficulties that might be encountered in attempting to substantiate old claims. Responsibility for such difficulties must ultimately rest with those who, for whatever reasons, failed to make the claims when they first arose.” (Lothian NHS Health Board [2015] UKUT 264 (TCC), §23, Lord Tyre approved in HMRC v. NHS Lothian Health Board [2022] UKSC 28 at §72.

 

“it is the claimants who have chosen to bring their claims, involving very large sums of money, and the evidential burden lies on them to demonstrate that the no possibilities test is satisfied. The Revenue cannot reasonably be blamed for making searching enquiries when so much is at stake…The process may well be inconvenient, time-consuming and expensive for the claimants; but (subject to what I say below about the way forward) it is in my view a burden which they have brought upon themselves, and about which they cannot legitimately complain.” (The Claimants Listed in the Group Register of the Loss Relief GLO v. HMRC [2013] EWHC 205, §52).

 

“The burden of proving that the two companies have not recovered the input tax on employee’s travel and subsistence expenses falls on the taxpayer in appeals such as the present one. And whilst only the civil standard of proof is involved, the tribunal cannot be expected to make decisions simply on the basis that a claim covers a period long ago for which a taxpayer cannot be expected to hold any records, so that its claims should be accepted without question and without evidence.” (WMG Acquisition Co UK Ltd v. HMRC [2013] UKFTT 215, §29).

 

“HMRC should, of course, be reasonable in terms of the evidence which it will accept: it is as true for the College as it was for M&S that the three year cap was not its fault, and gathering evidence would have been more straightforward in 1997 that it was when the Claim was made, some twelve years later. But we respectfully agree with both Henderson J and Judge Demack that there must be sufficient evidence to support the Claim.” (Imperial College of Science, Technology & Medicine v. HMRC [2015] UKFTT 0033 (TC), §204).

 

“We also accept [the appellant’s] submission that the principle of effectiveness does not require perfect accuracy in relation to the underlying facts.” (Perenco Holdings v. HMRC [2015] UKFTT 0065 (TC), §103).

- Historic claims: there must be sufficient evidence to estimate with reasonable certainty

- Task is to ascertain the correct amount of VAT overpaid on the material before it (but not act as forensic accountant)

 

"[76] The FTT was also right to decline the role of forensic accountant on behalf of NHS Lothian. The CJEU has stated that the principle of effectiveness does not require a national court to step beyond the passive role it is given by national rules: van Schijndel and van Veen v Stichting Pensioensfonds voor Fysiotherapeuten (Joined Cases C-430/93 and C-431/93) EU:C:1995:441, [1995] ECR I-4705. That does not mean that the figure determined by the FTT must be either the figure in the taxpayer’s claim or zero. The process of preparing for hearings and appeals, the forensic process of the tribunal hearing itself and the judges’ subsequent deliberations identify errors or alternative approaches which refine the case ultimately set out in the decision. The judge arrives at the right figure in accordance with his or her assessment of the facts and the law and that may end up being somewhere in between the figures for which the opposing sides were contending. That is legitimate subject, of course, to the judge ensuring that both parties have an opportunity to comment on any new method the judge alights on which was not raised by the parties or fairly explored at the hearing. This judgment does not, therefore, cast doubt on what was said in the passage from Revenue and Customs Commissioners v General Motors (UK) Ltd [2015] UKUT 605 (TCC), [2016] STC 985 cited by the Inner House in para 49 of their judgment. But that is entirely different from the exercise on which NHS Lothian wanted the FTT to embark in order to comply with the principle of effectiveness." (HMRC v. NHS Lothian Health Board [2022] UKSC 28)

“The task of the FTT was to ascertain the correct amount of VAT overpaid, as far as it could properly do so on the material before it.” (HMRC v. General Motors (UK) Limited [2015] UKUT 605 (TCC), §75, Henderson J and Judge Sinfield).

- Task is to ascertain the correct amount of VAT overpaid on the material before it (but not act as forensic accountant)

- Acceptable to use modelling if shown to be reliable

 

"[73] Further, it is remarkable in this case that both HMRC and the FTT did adopt a very flexible attitude towards the methods by which NHS Lothian could have made good its claim. NHS Lothian’s own evidence was that apart from the 1991-1992 accounts which had been found, the information available was not sufficient to allow an accurate calculation of the total taxable turnover during the claim period. Neither HMRC nor the FTT insisted that the claim could only be proved by the production of contemporaneous VAT invoices supplied together with a detailed contemporaneous break down of the ratio of income derived from business activity to that derived from non-business activity in each of the years...

...

[75] When applying that guidance in NHS Lothian’s case, HMRC were prepared to go a long way down the path suggested by NHS Lothian. They accepted that a proxy for the actual split of input tax between business and non-business expenditure in each year in the claim period could be used by looking at the percentages of the work actually done for business and non-business activity and, further, that a percentage calculated for one year could then in principle be applied to other years. However, both HMRC and the FTT rightly required that there be some way of establishing that the key ratio during the claim period was likely to have been the same as it was in the more recent year for which it was possible to calculate that ratio. It was this step that NHS Lothian was unable to take, either on the basis of documentary evidence or on the basis of oral evidence from those who worked in the laboratories over the period." (HMRC v. NHS Lothian Health Board [2022] UKSC 28)

“In the second place, we agree with Mr Cordara that the exercise which the FTT had to perform was essentially a unitary one. They did not first have to decide whether the econometric evidence before them met a particular qualitative threshold, but rather had to assess it together with all the other evidence before delivering their answer on a balance of probabilities. They were right to observe that they were not in the land of academic papers. Their overriding duty was to ascertain, if they properly could, the true amount of VAT due during the Claim Period, drawing for that purpose on their own experience and expertise as well as the evidence presented to them. If the performance of this duty involved an element of subjectivity, that means no more in the present context than that they had to bring their own skill and judgment to bear on the problem, and they were not bound by the standards of evaluation which would apply if the same question arose in an academic context. In our view the FTT discharged their duty carefully and conscientiously, and with a full awareness of the potential weakness of the data which underlay Mr Robinson’s model." (HMRC v. General Motors (UK) Limited [2015] UKUT 605 (TCC), §142, Henderson J and Judge Sinfield).

- Acceptable to use modelling if shown to be reliable

- Facts in relation to which HMRC alone had the evidence 

 

“We accept that HMRC were the only ones (as between the parties) who would have held such evidence and had such knowledge…We do not accept Mr Shepherd’s submission that the fact that HMCE (or HMRC) were not obliged to retain such evidence beyond six years means that they do not bear the evidential burden of proving what relevant applications were made. Of the two parties, HMRC were the only ones to have ever held such evidence, or to have had knowledge of relevant applications having been made. It would be unreasonable, and unjust, to expect RBKC to adduce evidence of relevant applications not having been made (quite apart from the obvious difficulty of requiring them to prove a negative).” (Royal Borough of Kensington & Chelsea v. HMRC [2014] UKFTT 729 (TC), §§61 – 62)

 

“In the RBKC case, the taxpayer never had the information (viz the information on what claims had been made directly to HMRC) which was critical to the determination of the appeal. It was HMRC and HMRC alone that had possessed that information. In this case, however, Perenco did at one stage have the information but had destroyed it in accordance with document retention policy.” (Perenco Holdings v. HMRC [2015] UKFTT 0065 (TC), §91).

- Facts in relation to which HMRC alone had the evidence 

- Non-availability of evidence does not affect standard of proof

 

"[89] Conversely, I disagree with the suggestion in para 45 of the Inner House’s judgment that if a taxpayer has been at fault in not keeping proper records or by destroying records prematurely, it might be legitimate to infer that the taxpayer has failed to prove its entitlement. There may be other penalties imposed for poor record keeping but it would not be appropriate for HMRC or the tribunals to adopt a more exacting standard of proof because of some perception that the taxpayer has been at fault. If the taxpayer has either properly or foolishly destroyed the records it once held because of its own retention policies, that may prevent it from proving that it incurred the input tax which it now wishes to claim. The non-availability of evidence in such circumstances is a fact of life that often determines whether parties bring or refrain from bringing proceedings to enforce their rights in all areas of the law." (HMRC v. NHS Lothian Health Board [2022] UKSC 28)

- Non-availability of evidence does not affect standard of proof

Time limit: 4 years

 

Claim for overpaid tax

"(4)     The Commissioners shall not be liable on a claim under this section—

(a)     to credit an amount to a person under subsection (1) or (1A) above, or

(b)     to repay an amount to a person under subsection (1B) above,

if the claim is made more than 4 years after the relevant date." (VATA 1994, s.80(4))

 

Relevant date

"(4ZA)     The relevant date is—

 

(a)     in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection, unless paragraph (b) below applies;

 

(b)     in the case of a claim by virtue of subsection (1) above in respect of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;

 

(c)     in the case of a claim by virtue of subsection (1A) above in respect of an assessment issued on the basis of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;

 

(d)     in the case of a claim by virtue of subsection (1A) above in any other case, the end of the prescribed accounting period in which the assessment was made;

 

(e)     in the case of a claim by virtue of subsection (1B) above, the date on which the payment was made.

 

In the case of a person who has ceased to be registered under this Act, any reference in paragraphs (b) to (d) above to a prescribed accounting period includes a reference to a period that would have been a prescribed accounting period had the person continued to be registered under this Act." (VATA 1994, s.80(4ZA))

Erroneous voluntary disclosure

"(4ZB)     For the purposes of this section the cases where there is an erroneous voluntary disclosure are those cases where—

(a)     a person discloses to the Commissioners that he has not brought into account for a prescribed accounting period (whenever ended) an amount of output tax due for the period;

(b)     the disclosure is made in a later prescribed accounting period (whenever ended); and

(c)     some or all of the amount is not output tax due." (VATA 1994, s.80(4ZB))

Claim for input tax: 4 years from deadline for return for first period in which input could have been claimed

"(1A)     Subject to paragraph (1B) the Commissioners shall not allow or direct a person to make any claim for deduction of input tax in terms such that the deduction would fall to be claimed more than 4 years after the date by which the return for the first prescribed accounting period in which he was entitled to claim that input tax in accordance with paragraph (1) above is required to be made." (SI 1995/2518, r.29(1A), paragraph (1B) deals with returns before April 2006)

Claim for interest

"(11)     A claim under this section shall not be made more than 4 years after the end of the applicable period to which it relates." (VATA 1994, s.78(11))

Time limit: 4 years

Time of making claim​

 

Claim only made when despatched

 

“On the plain meaning of those words, we reject any suggestion that a claim can properly be said to have been made in writing to the Commissioners before any attempt has been made to deliver that claim to them. Accordingly we reject Mr Edwards’ submission that the claim was “made” (within the meaning of s 80 VATA) at the time it was prepared and finalised ready for despatch to HMRC (or indeed at any other time before an attempt was made actually to despatch it).” (Edgbaston Golf Club Ltd v. HMRC [2018] UKFTT 189 (TC), §25, Judge Poole)

 

Claim made when posted/emailed with correct address

 

“We note that in Quintain, the VAT and Duties Tribunal held that the posting of a claim to the Commissioners before expiry of the time limit, even where they did not receive it until after such expiry, meant that the claim had been “made” before the time limit had expired…We would respectfully agree with this approach, subject to the obvious qualification that the letter must have been correctly addressed. Applying it to the modern medium of email, in a situation where HMRC had provided a specific email address to which claims could be sent, we would take a similar view – i.e. if it could be proven that a claim had been sent before the deadline to the correct email address, then that claim would have been “made” in time.” (Edgbaston Golf Club Ltd v. HMRC [2018] UKFTT 189 (TC), §§27…28, Judge Poole)

 

Claim not made when emailed to wrong email address

 

“The difficulty with the appellant’s case, however, is that it did not send the claim to the correct email address.  That is the modern equivalent of misaddressing a letter sent through the postal service, but with the added factor that even a single misplaced character in an email address means the email will not reach its destination.  Unfortunately, Mr Taylor made a mistake and did not include the crucial “.gsi” element in the email address to which the claim was intended to be sent.  We all make mistakes.  Mr Taylor had clearly been working at speed under a great deal of pressure in compiling the claim, but unfortunately none of that can affect our view: the fact of the matter, unfortunate though it may be, is that the mistake in the email address meant that the claim had clearly not been made “to the Commissioners” before 1 April 2009.” (Edgbaston Golf Club Ltd v. HMRC [2018] UKFTT 189 (TC), §29, Judge Poole)
 

Time of making claim​

Late claims

HMRC do not have a residual discretion to extend time limits

 

“The Tribunals in Nova Stamps and Oceanteam made comments to the effect that there may be a residual discretion on the part of HMRC. The difficulty in relation to this suggestion is that it does not take account of the nature of the legislation as implementing the Directive. There is nothing in the Directive that can be regarded as making any provision for the introduction of any discretion. In the absence either of any specific provision, or of anything that could be construed as implying the existence of such a discretion, the requirement to submit a claim before the expiry of the time limit must be regarded as absolute.” (SAS SVS La Martiniquaise v. HMRC [2015] UKFTT 515 (TC), §43).

 

Or, HMRC do have discretion

 

See C2: Time limits and late claims
 

Late claims

Abuse: late claims unnecessary as HMRC required to achieve neutrality of their own initiative

 

“HMRC lost the Moorbury case on the quite different principle that in accordance with the Halifax decision, the ECJ had said that when an abusive transaction was undermined by the abuse doctrine and had to be “redefined” that redefinition had to ensure that no penalty was occasioned. HMRC had to effect a redefinition that looked at the net position of all parties, undermined the abuse (whatever it was) but then left the parties in the realistic net position that should prevail simply to reverse the abuse but occasion no penalty. The Tribunals decided that this required HMRC, on its own initiative, to achieve this neutral end result, regardless of the claims by the taxpayers. It was therefore on this ground that credit had to be given in the redefinition for the amount properly repayable to Moorbury, and not because Moorbury could re-open a time-bar point.” (St Martin’s Medical Services Ltd v. HMRC [2012] UKFTT 485 (TC), §84).
 

 

Abuse: late claims unnecessary as HMRC required to achieve neutrality of their own initiative

Amendment of an existing claim outside of time limit

 

An outstanding VAT claim may be amended. The advantage of this is that if the taxpayer can amend an existing claim, then the claim, as amended, will be subject to the procedural rules in force at the time of the original claim. For example, in Reed Employment Ltd v. HMRC [2013] UKUT 109 (TCC), the taxpayer sought to amend a claim made before 26 May 2005 to avoid the application of the unjust enrichment defence introduced for claims made on or after that date. Although there is no authority on the point, the time limits apply to making a claim and it logically follows that if amendment is not the making of a new claim, the time limits are not applicable. 

 

Original claim must be outstanding (not paid in full and appeal mechanism not exhausted based on ordinary time limits)

 

“As a preliminary matter, it was common ground between the parties that by reason of the Appellant’s outstanding appeal dated 16 September 2009 against rejection of the Original Claim…” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §26, Snowden J).

 

“Nor is there any authority on this question, save for two VAT Tribunal decisions holding that once a claim has been paid, any further demand cannot constitute an amendment to that claim. This was accepted by Reed in this case, and thus the 2009 Claim cannot be regarded as an amendment to the first or second repayment claims.” (Reed Employment Ltd v. HMRC [2013] UKUT 109 (TCC), §30, Roth J).

 

“By completed I mean a claim which:
a)     has been met in full by the Commissioners;
b)     has been met in part by the Commissioners and the time limit for appealing against the rejection of the remainder prescribed by rule 4(1) of the VAT Tribunals Rules 1986, as amended, has expired;
c)     has been met in part by the Commissioners, the taxpayer has appealed against the rejection of the remainder, his appeal has been determined either by the tribunal or a court and the time limit prescribed for appealing against that determination has expired or the appeal has been compromised;
d)     has been rejected in full by the Commissioners and the time limit for appealing against that rejection prescribed by rule 4(1) of the VAT Tribunals Rules 1986, as amended, has expired;
e)     has been rejected in full by the Commissioners, the taxpayer has appealed against that rejection, his appeal has been determined either by the tribunal or a court and the time limit prescribed for appealing against that determination has expired, or the appeal has been compromised.
For the benefit of doubt, I should add that where I have referred to the time limit for appealing having expired, I include exhaustion of the appeal process…I might also add that where in proceedings leave to appeal is required, I believe that an application for leave which has been made but not determined means that a claim remains outstanding…Any claim that has not been completed is an outstanding claim, i.e. one which in my judgment is a claim for the purposes of s. 80 of the 1994 Act.” (University of Liverpool VTD16769, §§26 – 29).

 

“The Tribunal having considered the content and form of the document of 23 August are wholly unable to consider that as being a decision letter. It contains no reference to the matter of finality or of appeal and, worse, no letter from the Respondents in this case purported to be either final or to comply with the internal guidelines for officers of the Respondents in relation to decisions or reconsiderations. No finality would be deduced from any of the Respondents letters dealing with the merits of the claims as submitted, and that despite the terms of the Appellant's letter of 11 October. HMRC made invitations on all the correspondence to discuss further…Nowhere in that guidance is it contemplated that a letter could properly be issued which could be asserted by HMRC to be a decision which did not contain intimation of the right to appeal nor, even, that a decision could be communicated other than by letter. This Tribunal does not consider that email chat can constitute such a significant communication as will contain intimation of the need to appeal and as a consequence be significant in relation to time limits and capping provisions.” (John Martin Group VTD19257).

 

Amendment must arise out of the same subject matter as original claim without extension of relevant facts and circumstances

 

“I note that in Reed, Roth J. endorsed the point made by the FTT in the first sentence of paragraph 111 of its judgment, that the test of whether a subsequent claim should be regarded as an amendment of an original claim will be satisfied only if the later claim arises out of the same subject matter as the original claim, without extension to facts and circumstances that fall outside the contemplation of the earlier claim... Put in those simple terms, it is clear that the Original Claim did not include and did not contemplate a repayment claim in respect of MSB, or a claim in respect of any supplies during periods prior to 1 November 1980.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §§35…36, Snowden J).

 

“A claim must satisfy the mandatory requirements of writing, amount and method of calculation. The latter two identify its character – how much is claimed, and how that amount was determined. Errors and omissions may be corrected provided the correction does not enlarge the scope of the claim by adding elements not in contemplation when the claim was originally made…In Reed Employment the taxpayer attempted to enlarge its claim by adding to it a further element arising from similar facts but in respect of supplies which were not within the contemplation of its original claim. For the reasons we have given we agree with Roth J that it was not permissible to effect such an amendment. Vodafone wishes to go even further, by changing the entire basis of its claim. It is, as Mr Hill says, attempting to abandon one claim and pursue another. In our judgment that is not a permissible course; it amounts to an attempt to circumvent the time limit imposed by s 80(4).” (HMRC v. Vodafone Group Services Limited [2016] UKUT 89 (TCC), §§61…62, Warren J and Judge Bishopp).

 

“That test, in our view, will be satisfied only if the later claim arises out of the same subject matter as the original claim, without extension to facts and circumstances that fall outside the contemplation of the earlier claim. Without deciding matters outside of this appeal, we consider, for example, that this would generally include cases where a particular computation was not made at the time of the original claim, but the subject matter of the claim was sufficiently identified for such a calculation made subsequently to be related back to the original claim.” (Reed Employment v. HMRC [2013] UKUT 0109 (TCC), §§32 – 33, Roth J – UT approving part of FTT judgment.)

 

Difficult to imagine amendments relating to different supplies

 

“Although it is difficult to imagine a subsequent claim being regarded as an amendment to an earlier one unless they related to the same supplies, the converse is not necessarily the case.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §33, Snowden J).

 

Or different geographical area

 

“But as Roth J. pointed out, the concept of amendment of an earlier claim would not cover a further demand made by reference to supplies made in a different geographical area, or in a different type of business than the one specified in the first claim in circumstances where, viewed objectively, there had been a conscious decision to limit the supplies which were the subject of the first claim.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §39, Snowden J).

 

New claim even though it relates to the same supplies

 

“Even if a taxpayer only ever supplies one type of service throughout the course of his business, it does not mean that two claims for repayment made at different times and covering supplies made in different accounting periods must necessarily be regarded as one claim and an amendment to it. As Roth J. made clear in paragraph 31 in Reed, there is no reason why the two claims could not be regarded as self-standing. Moreover, a conclusion that a later claim could always be regarded as an amendment to an extant earlier claim in respect of the same or similar supplies would significantly undermine the effectiveness and purpose of the limitation period in section 80 VATA, because it would not encourage accuracy and finality in the submission of claims.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §33, Snowden J).

 

Correcting accidental arithmetical error or clear omission not a new claim

 

“It is also clear that when Roth J. referred in Reed to the correction of mistakes by amendment, “whether that be an arithmetical error or through the omission of some supplies that were clearly intended to be included”, he was referring to the correction of accidental errors or omissions. The concept of mistake in this context cannot include a conscious decision by a taxpayer not to include certain items in a demand. That is so even if, with the benefit of hindsight as to law or fact, it is subsequently appreciated by the taxpayer that it would have been preferable to have included further supplies and his earlier decision not to do so turned out not to be to his best advantage.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §38, Snowden J).

 

“If subsequent to the submission of a claim, the taxpayer sends in the correction of a mistake, whether that be an arithmetical error or through the omission of some supplies that were clearly intended to be included, then I consider that would clearly not be a new claim but an amendment.” (Reed Employment v. HMRC [2013] UKUT 0109 (TCC), §33, Roth J).

 

Further information in respect of subject matter of existing claim not a new claim 

 

“…if the taxpayer making a claim says that he is not yet able to calculate the full figures and father all the documentation as required by reg 37, but is in the course of doing so and will provide such further details as soon as possible, such further submission would not constitute a new claim but fall within the scope of the existing claim. Thus I consider that what is an amendment is very much a question of fact and degree, judged by the particular circumstances.” (Reed Employment v. HMRC [2013] UKUT 0109 (TCC), §33).

 

“the subject matter of the claim by BAS is confined to overpayments under the Elida Gibbs head. It is not, however, confined to the single year for which an amount was stated, as the claim is clearly stated by the Letter to extend to period between 1973 and April 2007. To the extent that further information provided by BAS is confined to that subject matter, it will not represent a new claim, but will be an amendment to the claim made by virtue of the Letter of 30 March 2009.” (Bratt Auto Services Ltd v. HMRC [2014] UKFTT 676 (TC), §38).

 

Clearly defining scope of claim excludes amendment 

 

“As to a claim for MSB, the wording of the Original Claim could not have been clearer in referring only to MCB, AWP and JM. On any objective reading, the Original Claim did not include a claim in respect of MSB.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §37, Snowden J).

 

“[The taxpayer] gave the example of a claim for a particular accounting period in respect of supplies in London, where the taxpayer subsequently wrote to ask for repayment in respect of supplies made for the same accounting period in the rest of England. However, in my judgment, unless there was some express reservation in the initial claim of the kind that I have indicated, the later request would clearly constitute a separate claim. So also if Reed initially sought to claim reimbursement of allegedly overpaid VAT only for its placement services in the healthcare sector, and subsequently made a demand for repayment as regards another part of its business, notwithstanding that this was for the same accounting period and arising out of the same error.” (Reed Employment v. HMRC [2013] UKUT 0109 (TCC), §38 – on the facts a claim for overpaid output VAT on supplies to persons unable to recover VAT was not capable of amendment to cover supplies to persons able to recover VAT).

 

New reasons for old claim 

 

“the taxpayer [can change] the basis of an in-time claim where tax really was…overpaid…but not for the reason which prompted the in-time…claim to be made in the first place.” (Vodafone Group Services Ltd v. HMRC [2014] UKFTT 701 (TC), §102).

 

“In my judgement the application [to amend the grounds of appeal] ought to be allowed. I accept [the taxpayer’s] submission that this is an alternative argument in support of part of the original claim rather than a new claim, since the original claim was for the whole of the input tax and the amendment merely provides an additional reason for the validity of part of that claim.” (Quicks Plc VTD15836, §15).

 

But must not change the fundamental basis of the claim

 

“In our view, the claim is not simply for a sum of money in abstract. Rather, it is for the amount which the taxpayer asserts has been brought into account as output tax that was not output tax due. HMRC’s liability is not simply for a sum of money; rather, it is for a sum of money equal to the amount of output tax accounted for which was not output tax due. The taxpayer’s claim under section 80(2) is likewise not, we consider, simply for a sum of money, but is for a sum or money related to particular transactions in respect of which output tax has been accounted for.” (HMRC v. Vodafone Group Services Limited [2016] UKUT 89 (TCC), §51, Warren J and Judge Bishopp)

 

HMRC’s published views not relevant to time limits/amendments

 

“I also reject an argument advanced by Mr. Tack to the effect that the Appellant should not suffer for not including the MSB claims in its Original Claim, because at the time HMRC’s published position was that VAT was chargeable upon participation fees for MSB and it would therefore have rejected a claim for MSB. A similar argument was advanced and firmly rejected in Leeds City Council v HMRC [2015] EWCA Civ 1293 at paragraph 43, where Lewison L.J. held that the fact that, at a relevant time, HMRC were advancing a view of the law which was subsequently conceded to be wrong does not preclude it relying on a limitation period.” (Grand Entertainments Company v. HMRC [2016] UKUT 209 (TCC), §40, Snowden J).

 

“I have some sympathy with the Appellant’s point that it was only in March 2012 that the Appellant was aware of HMRC’s revised stance (which abandoned the relevance of chemical reactivity of limestone in concrete) and so the Appellant was in a position to frame its claim in the light of HMRC’s revised stance…In the present case I consider that the subject matter is different (for example, the two different definitions of Manufactured Product in the appeal notices) and the facts and circumstances of the purported function of the material >125µ but <4mm (as being a filler in mortar) fall outside the contemplation of the 2011 claim.” (Aggregate Industries UK Ltd v. HMRC [2017] UKFTT 391 (TC), §§85…86, Judge Kempster).
 

Amendment of an existing claim outside of time limit

Unjust enrichment defence (s.80 claim)

 

See C10: VAT claims and unjust enrichment

Unjust enrichment defence (s.80 claim)

Set off against amounts due arising out of the same mistake irrespective of whether HMRC are in time to assess

"(3A)     Where—

(a)     the Commissioners are liable to pay or repay any amount to any person under this Act,

(b)     that amount falls to be paid or repaid in consequence of a mistake previously made about whether or to what extent amounts were payable under this Act to or by that person, and

(c)     by reason of that mistake a liability of that person to pay a sum by way of VAT, penalty, interest or surcharge was not assessed, was not enforced or was not satisfied,

any limitation on the time within which the Commissioners are entitled to take steps for recovering that sum shall be disregarded in determining whether that sum is required by subsection (3) above to be set against the amount mentioned in paragraph (a) above." (VATA 1994, s.81(3A))

"(3)     Subject to subsection (1) above, in any case where—

(a)     an amount is due from the Commissioners to any person under any provision of this Act, and

(b)     that person is liable to pay a sum by way of VAT, penalty, interest or surcharge,

the amount referred to in paragraph (a) above shall be set against the sum referred to in paragraph (b) above and, accordingly, to the extent of the set-off, the obligations of the Commissioners and the person concerned shall be discharged." (VATA 1994, s.81(3))

Only applies to claims

"[53] There are two preliminary points to make about the way in which section 81 (3) operates. First, it only applies where a claim for repayment has been made by the taxpayer under section 80 (2). So it is the taxpayer who chooses to invoke the statutory machinery. Thus in our case HMRC cannot initiate any action to recover the amount of payments made to the Trust in connection with the refurbishment, because (as is common ground) they are out of time under sections 73 and 77." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

Cannot result in net liability to HMRC

"Second, section 81 (3) only goes so far as to provide that HMRC's obligation to make a repayment is "discharged" to the extent of the set off. It does not go so far as to say that the application of the set-off could result in the taxpayer having to make a further payment of VAT to HMRC. So although the taxpayer may be better off as a result of a claim, he cannot be worse off." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

To be interpreted, as far as possible, to put the taxpayer in the position if no mistake had been made

"[39] It follows, in my judgment, that section 81 (3A) of VATA ought to be interpreted, so far as it can be, to achieve the result that the Trust is put into the position in which it would have been if the UK had correctly implemented article 13A (1) (n) by the deadline imposed by the Sixth Directive." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

Applies to over-claimed input tax and underpaid output tax

"[59] The purpose of s 81(3A) is, in my judgment, clear. It is that where a taxpayer makes a claim for repayment of VAT which has been paid owing to a mistake, all the consequences of the mistake are to be taken into account in assessing the quantum of his claim. That purpose is consistent with the overarching scheme of VAT under the Sixth Directive which treats the payment of output tax and the deduction of input tax as an “inseparable whole”. This is borne out by s 81(3A)(b) which deals with amounts payable “to or by” the taxpayer. It is clear from this that s 81(3A) was intended to allow HMRC to take into account both credits and debits. It is not, therefore, simply concerned with past claims by the taxpayer for credit of input tax. In evaluating those claims HMRC are also to look at amounts payable “by” the taxpayer: in other words output tax." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

Must derive from the same mistake

[59] ... Section 81 (3A) (b) is not limited to particular accounting periods. The main limiting factor is that the payment "to or by" the taxpayer must derive from the same mistake as that which gave rise to the claim. Section 81 (3A) is not part of the general scheme of VAT accounting, which requires a direct and immediate link between an input and an output. Rather it is a special provision, which seeks to undo the consequences (and all the consequences) of the same mistake." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

Burden of proving defence on HMRC

"[64]...If HMRC were to raise a defence of set-off they would, no doubt, have an evidential burden to surmount in order to advance the defence, which the taxpayer would then have to rebut." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

Set off against amounts due arising out of the same mistake irrespective of whether HMRC are in time to assess

Set off of amounts owed to taxpayer arising out of the same mistake irrespective of time limits

 

In relying on s.81(3A) HMRC must credit the taxpayer with overpayments made by him

"[60] HMRC must credit the taxpayer with overpayments made by him. If section 81 (3A) is seen as a limitation on what would otherwise be HMRC's ability to set off rather than a disapplication of time limits in favour of the HMRC, then there is no difficulty with the grain of the legislation. Under the Marleasing principle there is no need for the national court to pinpoint the precise verbal interpolations needed to bring the national measure into conformity with EU law. In my judgment the interpretation adopted by the Upper Tribunal was well within the bounds of the principle." (Birmingham Hippodrome Theatre Trust Ltd v Revenue and Customs Comrs [2014] EWCA Civ 684, Lewison LJ)

Set-off applies to the net amount of VAT repayable for the period of claim (cannot use output tax overpaid in period for which claim was out of time to reduce offset of input tax against output tax claimed for in-time period)

"[4] As appears from the table, HMRC settled claims (i)–(iii) by repaying the net amount of VAT overpaid in each period, being the difference between the over-declared output tax and the associated input tax which Rank had deducted from (ie recovered by way of set-off against) its presumed liability for output tax. Claim (iv) was, however, rejected as being out of time...

[5] Notwithstanding this, Rank has sought to recover the net amount of VAT (£67,052,023.65) which it would have been repaid under claim (iv) by contending that claims (i)–(iii) were wrongly calculated and repaid by HMRC. What HMRC should, it is said, have done was to reduce the amount of input tax which was brought into account to determine their net repayment liability under claims (i)–(iii) by deducting from those sums the £67.05m of overpaid VAT which would have been repayable under claim (iv) but for it being out of time...

...

[33] The separation of s.80(1) in its original form into what is now s.80(1), (1A) and (2A) has created a two-stage process under which the amount of overstated output tax is to be "credited" to the taxable person under s.80(1) and (1A) and then reduced by the set-off referred to in s.80(2A)(b). HMRC are then required to "pay (or repay)" to the claimant any credit which remains. It is therefore the set-off which crystallises the liability and leads to an obligation to repay.

...

[35]...What s.81(3) gives HMRC (and has always done so) is the ability to use other VAT liabilities of the claimant as a means of discharging their net liability to pay the amount of any overpaid VAT under s.80. A liability to "pay a sum by way of VAT", which is the language of s.81(3), is not an obvious way of describing the recovery of input tax that, as in this case, was set against an output tax over-declaration in relation to what was properly an exempt supply. The set-off made by Rank in its original returns resulted in a reduction of the amount of net VAT that was wrongly paid to HMRC. But it may be a permissible way of describing the recovery by HMRC of input tax that has been wrongly deducted in relation to other accounting periods where no output tax was over-declared by the claimant and where, consequently, a VAT credit has been wrongly paid by HMRC to the taxpayer under s.25(3). In those cases the deduction of the input tax will have been credited to the taxable person and will have directly reduced the amount of output tax that would otherwise have been recovered as part of the supply chain leading up to the taxable person. In such cases HMRC would need to raise an assessment under s.73(2) in order to recover the lost VAT.

[36] None of this, however, applies in my view to the recovery of input tax as part of the operation of s.80(2A) in relation to claims under s.80(1) and (1A). In those cases, s.81(3) has no application and the basis of the s.80(2A) set off must be found elsewhere.

...

[42] It also follows that HMRC were not required to raise an assessment in order to achieve a set-off of any input tax credits against their s.80(1) liability to credit sums over-declared as output tax where the sums in question relate to the same accounting period nor was there any need for them to rely on s.81(3A). Their s.80 liability was never more than the net sum for which Rank accounted and paid. This is not a case where in calculating their s.80 liabilities under any of claims (i)-(iii) HMRC also sought to obtain a further credit by reference to the input tax which was deducted by Rank in the period covered by claim (iv). HMRC accept that in order to have done that they would have needed to make an out of time assessment and rely on s.81(3A). I think that Mr Macnab accepts that had they done that then the overpaid output tax for that period would also have had to have been brought into account." (Rank Group Plc v. HMRC [2020] EWCA Civ 550, Patten LJ)

Set off of amounts owed to taxpayer arising out of the same mistake irrespective of time limits

Claim does not become abusive because HMRC miss a related assessment time limit

 

“The fact in this case that thereafter one assessment was held to be time-barred, and that the other company’s claim was made in time resulted entirely from the neglect and incompetence of HMRC in failing to serve their assessment on  Healthcare in time. It is fanciful to say that Healthcare and Services planned in advance to effect their scheme, on a “fall-back” basis, by exploiting timing differences. The mismatch in these timing points is not remotely occasioned by any of the original scheme intentions of the parties. The suggestion that the end result remains abusive because some original and indelible stain of the original planning has had any influence on the ultimate result is simply unfounded when the mismatch results solely from HMRC’s own unprovoked and single-handed failure. Indeed now to reject a perfectly sound claim, on the altar of supposedly inviolable “neutrality” when the plain effect of that would be to overturn the earlier appeal that HMRC rightly lost would itself be an abuse.” (St Martin’s Medical Services Ltd v. HMRC [2012] UKFTT 485 (TC), §§57 – 59, Judge Nowlan)
 

Claim does not become abusive because HMRC miss a related assessment time limit

HMRC entitled to make reasonable enquiries into claim

“The Commissioners are under a duty to conduct a reasonable and proportionate investigation into the validity of claims for a refund and repayment and a duty to act proportionately both in respect of the investigation and in dealing with the taxable person's claims generally. see R (oao Deluni Mobile Limited) v. CCE [2004] EWHC 1030 ("Deluni"). The duty to investigate is applicable both to the claim to the refund and repayment and to the question whether there is a right to set-off (or indeed a claim for a further payment from the taxable person). The duty embraces an obligation to keep all investigations under review. The Commissioners are entitled to take a reasonable time to investigate claims prior to authorising deductions and repayments and what is a reasonable time within which to complete an investigation must depend on the particular facts: Strangewood at 505. The availability and proper exercise of the Commissioners' powers of investigation are essential to maintain the fiscal neutrality of VAT and prevent refunds being made to parties not entitled to them. The postponement of repayment of input tax pending the outcome of the investigation is, as a matter of principle and subject to questions of proportionality, entirely compatible with the Sixth Directive. Whilst the burden of proof is upon the taxable person to establish that the investigation of his unadmitted and unadjudicated claim and the failure to make a part or interim payment is unreasonable or disproportionate, the burden is on the Commissioners to justify non-payment of it once the claim is admitted or established and the period of investigation of any cross-claim.” (R (oao UK Tradecorp Ltd) v. CEC [2004] EWHC 2515 (Admin), §21).

Verified claim takes effect retrospectively

“Having carefully considered both letters and the comments of Roth J at [31] of Reed Employment v HMRC we find that the letter of 2 November 2011 does constitute a claim for the purposes of s 80 VATA. Although we accept, as Lightman J recognised in UK Tradecorp Ltd, that HMRC are under a duty to conduct a reasonable and proportionate investigation into the validity of a claim, we consider that there is no reason why once it has been verified the claim, and therefore overpayment of VAT, should not apply from the date of the claim.” (Dunn & Dyer (Electrical) Ltd v. HMRC [2013] UKFTT 597 (TC), §41).
 

HMRC entitled to make reasonable enquiries into claim
Acceptance of a claim

Acceptance of a claim

 

See C1: Direct tax claims in general

Repayment of VAT gives rise to taxable profit

"[31] What is clear from the findings (viz paras 13 and 14 above) is that March organised the group’s affairs so that VRP2 would be paid by HMRC to SDG via the solicitors, WGM, and that HMRC protected itself against other possible claimants by obtaining releases. SDG, as the First-tier Tribunal found, received VRP2 as its beneficial owner. It received sums “arising from the carrying on of the trade” of the companies enumerated in para 11 above during periods “before the discontinuance” and the sums were not otherwise chargeable to tax. VRP2 accordingly is subject to a charge to corporation tax in the hands of its recipient, SDG." (Shop Direct Group v Revenue and Customs Commissioners [2016] UKSC 7, Lord Hodge)

“It follows that the incidence of tax is determined by the ordinary corporation tax rules, and the fact that part of the profit taxed is derived from a VAT repayment is an equally ordinary consequence of the application of those rules. There is nothing in San Giorgio, Littlewoods or any of the other authorities to which Mr Southern and Mr Edwards took us which supports the proposition that the taxation rules must be disapplied when a restitutionary payment leads to a profit recognised in the recipient’s trading accounts.” (Coin-A-Drink Limited v. HMRC [2017] UKUT 211 (TCC), §16, Mann J and Judge Bishopp).
 

Rejection of claims

 

See C1: Direct tax claims in general

Rejection of claims
Repayment of VAT gives rise to taxable profit

Withdrawing and abandoning claims

 

See C1: Direct tax claims in general

Withdrawing and abandoning claims
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