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HMRC internal manual

VAT Refunds

HM Revenue & Customs
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Unjust enrichment: Some items to consider: Substitutes

In those cases where a product competes in a market with products whose VAT liabilities vary, food for example, it can often be significant if the claim is for an amount declared as VAT on the supply of goods competing with similar goods, or substitutes, which are liable to VAT at the reduced or zero rate.

Under such circumstances, it will be more difficult for us to show that the tax has been passed on because the claimant will obviously have had to price his product to compete with the zero-rate and reduced rate competitors.