Specific receipts: refunds of sums paid as VAT: refund accounted for someone other than the trader who made the overpayment: introduction
This is direct tax guidance; for indirect tax guidance, refer to VAT Guidance.
There are circumstances where the refund of a sum paid as VAT may be received and accounted for by an entity other than one that carried on the original trade.
For the treatment for direct tax purposes of a refund of sums paid as VAT which is paid to a representative member of a VAT group, see BIM40171.
The Court of Appeal held in Midland Co-Operative Society Ltd v Commissioners of HMCE  EWCA Civ 305that the right to claim for a refund of VAT can also be transferred.
When looking at the sums received by a company that does not currently carry on the activity that gave rise to the payment of VAT, nor has it done so in the past, then bear in mind that a key point is that the refund of a sum originally paid as VAT is not a windfall. It is a refund of sums paid as VAT that have been found as a result of legal action not to be VAT. It is important to remember HMRC does not make gratuitous refunds. The claimant must have made a valid claim.
It is a matter of analysis to determine the reason why a particular claimant has made a valid claim to a refund. That reason is the source for direct tax purposes.
This section on refunds received by someone other than the trader who made the overpayment contains the following further guidance:
|BIM40178||Payment for services|
|BIM40180||Post cessation receipts|