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HMRC internal manual

VAT Refunds Manual

What to do with claims resulting in unjust enrichment: reimbursement arrangements

In what circumstances may reimbursement arrangements be used?

Where a trader invoices VAT on supplies he makes to his customers and

  • the economic burden VAT charge is passed on to his customers, and
  • the trader’s business suffered no loss or damage as a result,

there is a reimbursement scheme under which HMRC can make payment of the trader’s claim conditional upon him agreeing to reimburse to his customers any amounts due to him under section 80.

Who can use reimbursement arrangements?

In principle any person who is entitled to make a claim under section 80 can undertake to reimburse his customers using the reimbursement arrangements. However, there are a few things that you need to be aware of – see the link at the end of this page.

Must the claimant reimburse his customers?

Use of the reimbursement scheme is entirely voluntary for the trader.

For example, we have been able to show that the claimant passed the economic burden of the full VAT charge on to his customers and he has been unable to show that his business suffered any loss or damage as a result.

We reject his claim for unjust enrichment – we refuse to pay his claim unless he undertakes to reimburse his customers under section 80A of the VAT Act and regulations 43A to 43G of the VAT Regulations.

At this point the claimant has a choice. He can walk away from the claim or he can agree to reimburse his customers. We cannot compel him to reimburse his customers.

What undertaking must the claimant give?

If the claimant agrees to reimburse his customers, he must agree to give an undertaking in the terms required by regulations 43A to 43G.

When must the claimant give the undertaking?

The law requires that any undertaking to reimburse is made no later than the date on which the claim is made.

However, we will not refuse to accept an undertaking given at any stage after the date on which the claim was made, for example, when the First-tier Tribunal finds that the claimant would indeed be unjustly enriched by payment of his claim.

What are the responsibilities under the scheme?

Having given the undertaking, the claimant is responsible for ensuring that his customers are reimbursed in accordance with the regulations.

What are our procedures around this scheme?

There are procedures for

  • pre-undertaking work
  • the signing of the undertaking
  • the reimbursement, and
  • verification.

See the link below for more details.

How much is to be reimbursed?

The claimant is bound to reimburse that amount by which he accepts, or we have been able to show, that he will be unjustly enriched if his claim is paid.

More detailed guidance

For more detailed guidance on

  • How much is to be reimbursed, see VRM12600.
  • Who can use the reimbursement arrangements, see VRM12700.
  • Reimbursement procedures, see VRM12800.
  • Unjust enrichment examples, see VRM12900.