The Administrative Court has held that HMRC’s decision to repay VAT would unjustly enrich a supplier in administration where the claimant was an unsecured creditor.
The claimant had erroneously paid VAT to the supplier, who then accounted for the VAT to HMRC. Under section 80(1) of the Value Added Tax Act 1994 (VATA) only the supplier could be repaid by HMRC, and would then pass the repayment on to the claimant. As the supplier was in administration, the repayment would be distributed to its creditors, of which the claimant was an unsecured one.
Supperstone J held as follows:
- Customs and Excise Commissioners v McMaster Stores (Scotland) Ltd (in receivership) [1995] STC 846 (a Scottish case) should no longer be regarded as good law. The legal landscape had changed. The decision of the ECJ in Reemtsma Cigarettenfabriken GmbH v Ministero delle Finanze [2008] STC 3448 had established that the customer who ultimately bore the burden of the VAT had a right under EU law to recover the full amount of the mistakenly paid VAT directly from HMRC.
- In Investment Trust Companies (In Liquidation) v The Commissioners for Her Majesty’s Revenue and Customs [2015] EWCA Civ 82 the Court of Appeal endorsed the application of Reemtsma in domestic courts.
- Under section 80(3) VATA the UK had provided the machinery to ensure fiscal neutrality and the mechanism to enable the monies to be paid directly to the claimant. Repayment to the supplier would amount to unjust enrichment under section 80(3) VATA.
R (Premier Foods (Holdings) Ltd) v HMRC [2015] EWHC 1483 (Admin), 21 May 2015
