Investment Trust Companies v HMRC: Repayments of VAT

01 April 2017
Author: Joseph Irwin

The case concerned claims made by certain investment trust companies (“ITCs”) for refunds of VAT which they had paid to investment managers on the supply of management services, which later turned out not to be due since the supplies in question were exempt under EU law.

On discovering that the VAT was not in fact due, the investment managers made statutory refund claims and then passed on the refunded VAT and interest to the ITCs. Such statutory claims were however (1) subject to a three year limitation period and (2) incapable of recovering the input VAT which the managers had deducted from the amounts paid on to HMRC. The ITCs therefore did not receive the full amount of the VAT that they had been charged and, as a result, brought claims in unjust enrichment against HMRC claiming that they should be able to recover the gross amount of VAT paid and that their claims should not be limited to the three year statutory period.

The Supreme Court held that the ITCs’ claims in respect of the input tax failed and that HMRC’s enrichment was limited to the amount which they had actually received from the investment managers. The enrichment did not include the amounts retained as input tax credits since the supplies should have been exempt, and so there had been no entitlement to deduct input VAT. The Court went on to hold that the ITCs had, in any event, been unable to make out a claim in unjust enrichment since there had been no direct transfer of funds from them to HMRC and, therefore, HMRC’s enrichment could not be said to have been at their expense. As a result, the ITCs’ claims for VAT paid outside of the three year statutory period also failed. Finally, the Court held that the statutory repayment scheme created an exhaustive code of remedies and, as such, was effective in excluding any common law claims which the ITCs may otherwise have had.

This article appears in the JHA April 2017 Tax Newsletter, which also features:


  1. AG Opinion in Austria v Germany: concept of ‘income from rights or debt-claims with participation in profits’
  2. Volkswagen Financial Services (UK) Ltd v Commissioners for Her Majesty’s Revenue and Customs
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