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HMRC internal manual

VAT Refunds Manual

Circumstances for a claim for refund: case law support

What is not an error

In the judgment on Victoria & Albert Museum Trustees -v- CCE [1996] STC 1016; [1996] BVC 366, it was held that where a trader, using a partial exemption method, deducts input tax on the basis of one calculation and then discovers that, if he used another calculation which would also give a fair and reasonable result, his input tax recovery rate would be increased, the ‘shortfall’ declared under the former method is not an under-claim of input tax.

It is not an error and cannot be reclaimed under regulation 29 of the VAT Regulations 1995 or corrected under regulations 34 and 35 (for guidance on regulations 34 and 35 see the VAT Assessments and Error Correction manual).

The same is true of retail schemes. The fact that the trader paid more in output tax under the scheme he was using than he would have had to do if he’d used another scheme does not mean that he has made a mistake. He may have made an error of judgement but he has not made a mistake that will entitle him to make a claim. There is no over-declaration of output tax and no claim under Section 80.