Recovering unlawful “passed on” VAT: ITC v Commissioners for HMRC, 2nd High Court Judgment
By Robert Waterson
The ITC case concerns the recovery by Investment Trust Companies of unlawfully levied VAT paid on services supplied to them by their management companies. The Managers were able only to recover the VAT they had passed on to HMRC on these services net of input tax deductions. The ITC case concerned the irrecoverable residual sum of VAT to which the ITCs remained out of pocket. The statutory provisions for the recovery of VAT provide no mechanism for the ITCs to recover this residual sum (because they are not the taxable person accounting for the VAT to HMRC) so the claimants issued claims in the High Court. This second judgment, which awaited judgments on a related point in the Supreme Court and CJEU in the FII and Littlewoods cases respectively, represents a win for the taxpayer on some of their claims (those outside for the so-called “dead period”). Like FII, two types claims were potentially available to the claimants: “Woolwich” type claims limited to 6 years and a “mistake” claim with a potentially unlimited time period. The issue before the Court was whether claimants were restricted to the least favourable of those options which would have left the claims entirely out of time. In FII the Supreme Court saw no reason why a claimant should be restricted to choosing the least-best remedy as a matter of principle in order to vindicate its rights at EU law. There was no reason to restrict the freedom of choice which English law normally affords where different remedies are available. Henderson J concluded, applying that judgment, that the claimants did have a “mistake” claim and therefore had no effective time limit on their claims.
This article appears in the JHA April 2013 Tax Newsletter, which also features:
- Exit Taxes: Case C-64/11 Commission v Spain by Federico M.A. Cincotta
- Interest on a Tax Refund Case: C-565/11 Mariana Irime by Federico M.A. Cincotta
- Cross Border Group Relief: Marks & Spencer in the Supreme Court by Michael Anderson
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Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
