© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
For additional search results use Google and enter:
site:procedure.tax [search term]
C8: Identity of claimant
Starting point: only person who paid tax may make a claim
“The effect of section 80(1) is that a claim for repayment may only be made by a person who has accounted for output tax to HMRC: in other words, by a supplier who has charged VAT to the recipient of its supply. Section 80 makes no provision for a claim to be made to HMRC by the recipient of a supply who has borne the burden of tax on that supply.” (HMRC v. Earlsferry Thistle Golf Club [2014] UKUT 250 (TCC), §12, Lord Tyre).
Supplier insolvent
"[92] This approach has been applied and restated in later cases. In the Danfoss case, the Court of Justice put the matter in this way:
“27. It follows that a member state may, in principle, oppose a claim for the reimbursement of a duty unduly paid made by the final consumer to whom that duty has been passed on, on the ground that it is not that consumer who has paid the duty to the tax authorities, provided that the consumer - who, in the final analysis, bears the burden of that duty - is able, on the basis of national law, to bring a civil action against the taxable person for recovery of the sums unduly paid.
28. However, if reimbursement by the taxable person were to prove impossible or excessively difficult - in particular, in the case of the insolvency of that person - the principle of effectiveness requires that the purchaser be able to bring his claim for reimbursement against the tax authorities directly and that, to that end, the member state must provide the necessary instruments and detailed procedural rules.”
In these passages, the insolvency of the taxable person is given as an example of circumstances where reimbursement by that person might prove impossible or excessively difficult, and where the principle of effectiveness would therefore be infringed. It is the most likely example to arise in practice, but it cannot be treated as necessarily exhaustive. The governing principle of effectiveness means that the purchaser must, in principle (and subject to procedural rules which are compatible with the principle of effectiveness, such as reasonable limitation periods), be able to recover from the member state where reimbursement by the taxable person would be impossible or excessively difficult." (Investment Trust Companies v. HMRC [2017] UKSC 29, §92)
No unjust enrichment claim by customer against HMRC
"[71] Returning, then, to the question whether the unjust enrichment of the Commissioners was at the expense of the Lead Claimants, and focusing on whether there was a transfer of value from the Lead Claimants to the Commissioners, the answer is in the negative. There was a transfer of value, comprising the notional £100, from the Lead Claimants to the Managers, under the contract between them. It was defective, because it was made in performance of a contractual obligation which was mistakenly believed to be owed. There was a subsequent transfer of value, comprising the notional £75, from the Managers to the Commissioners. It was also defective, because it was made in compliance with a statutory obligation which was inapplicable because it was incompatible with EU law. These two transfers cannot be collapsed into a single transfer of value from the Lead Claimants to the Commissioners.
[...]
[73] It follows that the Lead Claimants did not in principle have any right to restitution against the Commissioners. They did, on the other hand, have a right to restitution against the Managers. That right was to restitution of the entire amount paid in respect of VAT, ie the notional £100. The Managers did not in principle have a change of position defence in respect of the notional £75 which they paid to the Commissioners, since that change of position was reversible under section 80 of the 1994 Act, as I shall shortly explain. Nor did they have a change of position defence in respect of the notional £25 which they retained." (Investment Trust Companies v. HMRC [2017] UKSC 29, §71...73)
​
Customer of supplier who overpaid cannot reclaim from HMRC
"[87] More fundamentally, the determining factor in the present case is that the scheme created by section 80 is inconsistent with the existence of a concurrent non-statutory liability on the part of the Commissioners to make restitution to consumers. In the absence of section 80(7), one would therefore conclude that section 80 impliedly excluded such liability (assuming that it might otherwise exist). Given the existence of an express exclusion in section 80(7) which is capable of covering such liability, it is unnecessary to rely on implication: one can construe section 80(7) as having the same exclusionary effect.
[88] It follows that section 80 bars claims by the consumers who ultimately bear the burden of VAT. It nevertheless enables them to be reimbursed, subject to a limitation period designed to avoid the disruption of public finances." (HMRC v. Investment Trust Companies [2017] UKSC 29)
​
Unless reimbursement from the supplier is impossible or excessively difficult
​
"[92]...In these passages, the insolvency of the taxable person is given as an example of circumstances where reimbursement by that person might prove impossible or excessively difficult, and where the principle of effectiveness would therefore be infringed. It is the most likely example to arise in practice, but it cannot be treated as necessarily exhaustive. The governing principle of effectiveness means that the purchaser must, in principle (and subject to procedural rules which are compatible with the principle of effectiveness, such as reasonable limitation periods), be able to recover from the member state where reimbursement by the taxable person would be impossible or excessively difficult." (HMRC v. Investment Trust Companies [2017] UKSC 29)​
​
Assignees and (certain) successors may make claims unless the legislation expressly prohibits this
​
“HMRC accepts (as will appear below) that the statutory code allows for certain successors to make claims in particular situations. Accordingly the words "to him" have to include successors in those situations. Moreover, in my judgment, those words must also on general principle include payment to an agent of the taxpayer. "Where an enactment refers to a person it is usually taken as intended to include that person's agent authorised expressly or by implication." (Bennion, Statutory Interpretation, 4th ed, page 984). Likewise, where a statute refers to a person who has paid VAT, and gives him a right of repayment, the statute must in my judgment be taken, in the absence of contrary indication, to have intended to include a person in whom he has vested that right. In my judgment, the contrary indication would have to be clearly stated because the right to a repayment is a right of property which should not be restricted without clear wording. It would follow that if a person has assigned a chose in action to another so as to invest in him the right to sue for it, and to give a good receipt, HMRC could not properly pay the assignor.” (Midlands Co-operative Society Ltd v. HMRC [2008] EWCA Civ 305, §14).
​
“The only circumstances where a claim under section 80 would be accepted from any other person other [sic] than the person who made the over declaration would be where the right to make the claim had been assigned e.g. under the provisions of section 136(1) of the Land and Property Act 1925.” (HMRC v. Earlsferry Thistle Golf Club [2014] UKUT 250 (TCC), §4, quoting HMRC letter).
​
“ “him” in this context [VATA 1994, s.80] means the person who accounted for VAT or his agent, assignee or certain successors…” (Taylor Clark Leisure Plc v. HMRC [2014] UKUT 396 (TCC), §31).
​
Income tax repayment not assignable (15 March 2023)
"(1) A right of an individual to a repayment of income tax from HMRC may not be assigned.
(2) Every assignment of a right of an individual to a repayment of income tax from HMRC, and every agreement to assign any such right, is void.
(3) Subsection (2) has effect in relation to assignments and agreements to assign of which HMRC receives notice on or after 15 March 2023.
(4) In the application of this section to Scotland the reference to assignment of a right is to be read as a reference to assignation, “assign” being construed accordingly.
(5) In this section “HMRC” means His Majesty’s Revenue and Customs." (F(No.2)A 2023, s.333)
​
VAT groups
​
Only the representative member of the group may claim
​
"[29] It is clear from the words of section 80(1) that HMRC’s liability to credit or repay the overpaid output tax is owed to the person who accounted to them for VAT in the relevant accounting period or periods. It is also clear from the concluding words in subsection (2) (“for the purpose”) that a claim must be made for the credit or repayment to that person before HMRC come under any liability to credit or repay. Other subsections support this view. Section 80(3), which provides HMRC with the defence of unjust enrichment against a claim under subsection (1) or (1A), refers to the enrichment of the claimant and appears to assume that the claimant is the person who has accounted for the VAT. Subsection (4), which imposes a time limit on claims, also is drafted on the basis that the claim will result in the giving of a credit or repayment to the person who accounted for or paid the VAT in the first place. It therefore follows from the operation of section 43 of VATA that where there have been overpayments of VAT by the representative member of a VAT group, the person entitled to submit a claim during the currency of a VAT group, unless the claim has been assigned, is either the current representative member of the VAT group or a person acting as agent of that representative member.
[30] I therefore agree with the Extra Division in para 24 of their opinion that it is only the representative member who has any interest in making the claim. My disagreement is simply that one does not need the complication of viewing the group as a quasi-persona to reach that conclusion.
[31] In this regard I agree with the impressive analysis of the single taxable person in the context of a subsisting VAT group by the FTT (Judge Roger Berner and Mr Nigel Collard) in paras 73 -75 of the decision in Standard Chartered plc v Revenue and Customs Comrs [2014] UKFTT 316 (TC); [2014] SFTD 1270. In particular, as Judge Berner stated (para 73): “Under UK law, as set out in section 43 VATA, the concept of the single taxable person is properly implemented through the representative member. … The representative member is not the agent or trustee of the constituent members of the group. It is … the domestic law embodiment of the single taxable person”.
[32] Mr Scorey on behalf of TCL submits that the only taxable person is the VAT group, which alone has fiscal personality, and that any company within the VAT group can claim repayment of unduly levied VAT on behalf of the group. For the reasons set out above, I do not accept that submission." (HMRC v. Taylor Clark Leisure Plc [2018] UKSC 35)
​
Last representative member where group dissolved
​
"[175]...iii) Where the VAT group has been dissolved, the last representative member of the group has a claim under section 80 whether or not it is the same legal entity as fulfilled that role at the time of the supplies and whether or not it is still a taxable person. The question of who bore the economic burden of the tax is not a relevant consideration. The companies regarded as bearing the economic burden of the tax are in any event limited to those companies who paid the tax as one of the links in the chain by which the VAT is passed down to the final consumer.
iv) There may be exceptional circumstances in which the operation of sections 43-44 and sections 80 and 80A do not provide an adequate framework for the full enforcement of San Giorgio rights. None of the Appellants has established that such exceptional circumstances exist in its case." (Lloyds Banking Group Plc v. HMRC [2019] EWCA Civ 485, Rose LJ)
​
Taxpayer may not rely on erroneous claim by another person as his claim
​
In some circumstances there may be dispute or confusion as to who is entitled to claim back overpaid tax (for example, in VAT group situations). In those circumstances, one party may not rely on a claim by the other party to satisfy the time limit for making a claim. This will be important where it turns out that the person who made the claim was not entitled to do so, and the other person misses the time limit. It has not been tested whether this error could be corrected by the person with the entitlement assigning their right to repayment to the person who made the claim after the expiry of the time limit. HMRC will presumably argue that the entitlement to make the claim must exist at the time of making the claim.
​
"[38] I am also satisfied that TCL’s case of agency cannot get off the ground. Carlton had no actual authority to send the letters on TCL’s behalf. The FTT’s findings of fact, which were not challenged, destroyed any such assertion. The FTT held (para 55) that TCL “neither instructed nor authorised” Carlton to submit any of the claims and (para 57) that TCL was unaware that it had a potential claim under section 80 of VATA and that HMRC’s payment of £667,069 to it on 27 April 2009 “came out of the blue”. Similarly, there is no basis for an argument that TCL ratified Carlton’s claims which had been made on its behalf, thereby conferring retrospective authority. First, Carlton’s letters to HMRC did not purport to be written as agent of TCL. On the contrary, they were claims which Carlton pursued for its own benefit. That is fatal to the claim of ratification: Keighley, Maxsted & Co v Durant [1901] AC 240, especially Earl of Halsbury LC 243-244 and Lord Macnaghten 246-247. Secondly, there are no findings of fact that TCL ratified Carlton’s actions as its agent. This is unsurprising as TCL’s case before the FTT and UT had not been based on Carlton having acted as its agent." (HMRC v. Taylor Clark Leisure Plc [2018] UKSC 35)
​