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HMRC internal manual

VAT Refunds

Unjust enrichment: Some items to consider: How long has the VAT subject to the refund been incorrectly accounted for

The longer the claimant has been accounting for VAT wrongly, the better our chance of proving unjust enrichment.

It is unlikely that we could successfully invoke unjust enrichment where the claimant has only been applying VAT to his supplies for a relatively short period of time and where there has been no increase in price.

Have profits declined? If a trader’s profits have declined following the addition of VAT it is likely that he has absorbed the tax or has suffered an economic loss and unjust enrichment may be more difficult to prove.

Don’t always accept that a claimant’s declining sales are solely attributable to the incorrect imposition of VAT. There may be other underlying reasons such as

  • competitors opening nearby
  • shop ambience being poor
  • changing customer preferences
  • poor location in comparison to competitors.