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HMRC internal manual

VAT Refunds

HM Revenue & Customs
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Unjust enrichment: Economic loss or damage: Extent

The loss or damage that we are required to take into consideration when dealing with the refusal of claims is not limited only to damage cause to the business or line of business on which the VAT was wrongly accounted for.

The claimant is entitled to include in his quantified amount any damage caused to any part of his business by having made the mistaken assumption that led him to account for output tax when there was no requirement to do so.

In its decision in Gil Insurance Ltd (VAT Tribunal Decision IPT 00009), the VAT & Duties Tribunal held that

  • Loss or damage is not restricted to loss of sales and profits
  • We are required to take into account the loss or damage caused to any business carried on by the claimant
  • We are required to accept as part of the consideration any future loss or damage that the claimant can show will arise as a result of having made the mistaken assumption
  • We are required to take into consideration loss or damage caused also to the claimant’s non-taxable business activities
  • The fact that loss or damage arose as the result of the actions of the claimant does not exclude such loss from consideration. That is especially true where the further losses arose as a result of the claimant’s attempts to mitigate the losses
  • Where the claim is made by the representative member of a VAT group, the loss or damage to be taken into account is the loss or damage caused to the any of the business activities of any member of that VAT group.