End-customer claim refunds of VAT wrongly charged
Published 1 March 2022
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Purpose of this brief
This brief replaces Revenue and Customs Brief 4 (2017), and explains how end customer claims for refunds of VAT overpaid to a supplier are affected by the UK’s withdrawal from the EU.
Who needs to read it
Customers who have been wrongly charged an amount of VAT by their supplier, their professional tax advisors, and lawyers.
Background
Under section 80 VAT Act 1994, the only person entitled to claim back overpaid VAT from HMRC is the person who accounted for it on their VAT return. This was supported by the UK Supreme Court in its judgment in Investment Trust Companies (2017) UKSC 29.
Where a customer believes that it has overpaid VAT to its supplier this is a commercial matter between the 2 parties.
The customer’s remedy is to make a claim against that supplier. The supplier may then make a claim to HMRC and reimburse the customer under the arrangements in VAT Regulations 1995, regulations 43A-G.
However, in Investment Trust Companies the court also acknowledged that under general principles of EU law, where it was impossible or excessively difficult for a customer to obtain reimbursement from the supplier, then that customer may have been able to bring a claim against HMRC.
The court offered no definition of ‘impossible or excessively difficult’, although it referred to a supplier’s insolvency as a possible example.
Following the UK Supreme Court’s judgment in Investment Trust Companies (2017) UKSC 29, HMRC issued Revenue and Customs Brief 4 (2017). This made clear the circumstances that a third-party customer could make a claim directly against HMRC were extremely limited, but that anyone who believed they had a claim that was not precluded by the Supreme Court’s judgment must bring their claim in court.
The Commissioners for HM Revenue and Customs v Earlsferry Thistle Golf Club: [2014] UKUT 0250 (TCC) decision has more information on why claims cannot be made in the Tax Tribunal.
Effect of the European Union (Withdrawal) Act 2018 (EUWA)
With effect from 1 January 2021, EUWA 2018, Schedule 1, para 3 ended any right of action based on a failure to comply with any of the general principles of EU law.
This included the right to bring a claim in the exceptional circumstances identified by the UK Supreme Court in Investment Trust Companies (claims brought in court before 1 January 2021, remain unaffected).
If you think you may be able to claim a refund of wrongly charged VAT
If you believe you may be entitled to make a claim, you should seek professional advice.