Recovering unlawful “passed on” VAT: ITC v Commissioners for HMRC, 2nd High Court Judgment

01 April 2013
Author: JHA

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:

  1. Exit Taxes: Case C-64/11 Commission v Spain by Federico M.A. Cincotta
  2. Interest on a Tax Refund Case: C-565/11 Mariana Irime by Federico M.A. Cincotta
  3. Cross Border Group Relief: Marks & Spencer in the Supreme Court by Michael Anderson
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