VRM13000 - End customer claims for refunds of VAT wrongly charged

Under section 80 VAT Act 1994, the only person entitled to claim back overpaid VAT from HMRC is the person who accounted for it on their VAT return.

Where a customer believes it has overpaid VAT to its supplier this is a commercial matter between the two parties. The customer’s remedy is to make a claim against that supplier. The supplier may then make a claim to HMRC and reimburse the customer under the arrangements in VAT Regulations 1995, regulations 43A-G.

However, in Investment Trust Companies [2017] the UK Supreme Court also acknowledged that under general principles of EU law, where it was impossible or excessively difficult for a customer to obtain reimbursement from the supplier, then that customer may have been able to bring a claim against HMRC. The court offered no definition of ‘impossible or excessively difficult’, although it referred to a supplier’s insolvency as a possible example.

With effect from 1 January 2021, Schedule 1 Paragraph 3 of the EU Withdrawal Act 2018 ended any right to bring a claim against HMRC based on a failure to comply with general EU law principles. This included the right to bring a claim in the exceptional circumstances identified by the UK Supreme Court in Investment Trust Companies (claims brought in court before 1 January 2021, remain unaffected).

HMRC issued Revenue & Customs Brief 04 (2022) to make clear this right had lapsed.

If you receive one of these claims, then you should refer the customer to RCB 4 (2022). If the customer refuses to accept that they do not have a valid claim, they should seek professional advice as stated in RCB 4 (2022). There is no right of appeal under s83 Value Added Tax Act 1994.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)