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HMRC internal manual

VAT Refunds

Unjust enrichment: Reimbursement: 2005 Changes to the reimbursement arrangements

As a consequence of changes made in 2005 to Section 80 of the VAT Act 1994 there have been a number of amendments to the reimbursement regulations (Regulation 43A-43G of the VAT Regulations 1995). These amendments affect claims made on or after the 26 May 2005. 

There are two changes

  • The first concerns the extent of the reimbursement. When a business enters into the reimbursement arrangements they are required to reimburse their customers “… to the extent that they would be unjustly enriched …”. This may in some cases be the gross amount of credit that they receive (i.e. the gross amount of output tax for which the claimant was given credit under the claim). This may be a different amount to the amount that is actually paid to him. This would happen where the claimant has outstanding debts to the department or because countervailing input tax errors were set against the amount claimed.
  • The second requires that where a claimant is given credit for an amount under section 80 of the VAT Act 1994 on the condition that he reimburse it (together with any associated interest paid to him under section 78 of the VAT Act 1994) to his customers, he must notify us within 14 days after the expiry of the 90 days that he has under regulation 43C(a) of the VAT Regulations 1995 to make the reimbursements if he has been unable to reimburse any part of it and to repay that part to HMRC.

If he fails to make the notification and payment, we can make an assessment under section 80B of the VAT Act 1994 to recover any amounts that the claimant has been unable to reimburse.