Revenue and Customs v The Investment Trust Companies: SC 11 Apr 2017

Certain investment trust companies (ITCs) sought refunds of VAT paid on the supply of investment management services. EU law however clarified that they were not due. Refunds were restricted by the Commissioners both as to the amounts and limitation period applied. The claimants’ allegation of unjust enrichment by the Commissioners had been accepted by the CA. The Court was now asked whether the ITCs in principle could make out a claim in unjust enrichment against the Commissioners, whether such a claim was excluded by the statutory scheme under s.80 and whether the lack of any such claim was incompatible with EU law.
Held: The commissioners’ appeal was granted, and the cross appeal dismissed.
The Commissioners had been enriched only by the VAT it had received from the managers. This was the surplus of output tax over deducted input tax which it had actually received. Since the claimants had only paid the VAT to the managers, not direct to the revenue, that payment and the managers’ accounting to the revenue for and paying the VAT due was not reducible to one transaction of the transfer of value from the claimants to the revenue. The Commissioners had not been enriched at the direct expense of the claimants, so they had no right at common law to restitution from the revenue, although they may well have a claim against the managers for the VAT they had paid.
The limitation period is designed to avoid the disruption of public finances. Section 80(7) should be construed as excluding non-statutory claims by customers, as well as taxpayers (as was conceded), which might otherwise lie against HMRC in circumstances falling within the scope of section 80: ‘Parliament cannot sensibly be taken to have intended, when it created this scheme for the reimbursement of suppliers (with provision for them in turn to reimburse their customers), subject to strict time limits, that it should exist concurrently with non-statutory liabilities towards suppliers and their customers which were potentially wider in scope and were subject to a longer and less certain limitation period. Such an intention would be inconsistent with the rationale of the statutory scheme.’
Lord Neuberger, President, Lord Mance, Lord Reed, Lord Carnwath, Lord Hodge
[2017] UKSC 29, [2017] STI 1041, [2017] 2 WLR 1200, [2017] BVC 16, [2017] 3 All ER 113, [2017] WLR(D) 28, [2017] STC 985, [2018] AC 275, UKSC 2015/0058
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VAT Act 1994 80, Value Added Tax Regulations 1995
England and Wales
At First InstanceInvestment Trust Companies v HM Revenue and Customs ChD 2-Mar-2012
The claimant had properly accounted for VAT on its transactions for many years, but a decision of the European court had latterly ruled that the services were exempt. The claimant sought restitution from HMRC, who responded by arguing that . .
At ChD (2)Investment Trust Companies v Revenue and Customs ChD 26-Mar-2013
The claimant investment Trust companies sought repayment of taxes paid in error by way of restitution.
Held: The range of the the law of restitution to recover any tax unlawfully exacted was to be be restricted to those situations where the . .
Appeal fromInvestment Trust Companies v Revenue and Customs CA 12-Feb-2015
The claimants having sought repayment of overpaid VAT, they now complained of sums deducted by the Revenue.
Held: The Court allowed the Lead Claimants’ appeal, to the extent of the notional pounds 75 paid in respect of dead periods, and . .
CitedJP Morgan Fleming Claverhouse Investment Trust and Another v HM Revenue and Customs (Taxation) ECJ 1-Mar-2007
ECJ Value added tax – Exemption of the management of special investment funds Concept of ‘special investment funds as defined by Member States’ discretion limits – Closed-ended investment funds. . .
CitedFleming (T/A Bodycraft) v Revenue and Customs HL 23-Jan-2008
The transitional rules introducing time limits for failing to deduct VAT inputs made insufficient allowance for the decisions in Marks and Spencer and Grundig.
Held: Lord Hope said: ‘To be compatible with EU law, taxpayers were entitled to be . .
CitedWoolwich Equitable Building Society v Inland Revenue Commissioners (2) HL 20-Jul-1992
The society had set out to assert that regulations were unlawful in creating a double taxation. It paid money on account of the tax demanded. It won and recovered the sums paid, but the revenue refused to pay any interest accrued on the sums paid. . .
CitedTest Claimants In The Franked Investment Income Group Litigation v Inland Revenue SC 23-May-2012
The European Court had found the UK to have unlawfully treated differently payment of franked dividends between subsidiaries of UK companies according to whether all the UK subsidiaries were themselves UK based, thus prejudicing European . .
CitedMoses v Macferlan KBD 1760
An action for money had and received will only lie where it is inequitable for the defendant to retain the money. The defendant in an action for money had and received ‘can be liable no further than the money he has received’. . .
MentionedMoses v Macferlan KBD 1760
An action for money had and received will only lie where it is inequitable for the defendant to retain the money. The defendant in an action for money had and received ‘can be liable no further than the money he has received’. . .
CitedBecker v Finanzamt Muenster-Innenstadt ECJ 19-Jan-1982
ECJ It would be incompatible with the binding effect which article 189 of the EEC treaty ascribes to directives to exclude in principle the possibility of the obligation imposed by it being relied upon by persons . .
CitedLipkin Gorman (a Firm) v Karpnale Ltd HL 6-Jun-1991
The plaintiff firm of solicitors sought to recover money which had been stolen from them by a partner, and then gambled away with the defendant. He had purchased their gaming chips, and the plaintiff argued that these, being gambling debts, were . .
CitedPeter v Beblow 25-Mar-1993
Supreme Court of Canada – Family law – Trusts – Constructive trust – Long-term common law relationship – Unpaid homemaker – Homemaker maintaining and improving property – Whether proprietary link necessary to constructive trust established – Whether . .
CitedElida Gibbs Ltd v Commissioners Of Customs And Excise ECJ 24-Oct-1996
ECJ Where
(a) a manufacturer issues a money-off coupon, which is redeemable at the amount stated on the coupon by or at the expense of the manufacturer in favour of the retailer, (b) the coupon, which is . .
CitedBanque Financiere De La Cite v Parc (Battersea) Ltd and Others HL 16-Apr-1998
The making of an order for restitution after finding an unjust enrichment by subrogation, is not dependant upon having found any common or unilateral intention of the parties. The House distinguished between contractual subrogation of the kind most . .
CitedMinistero delle Finanze v IN CO GE ’90 and others ECJ 22-Oct-1998
(Rec 1998,p I-6307) (Judgment) The case concerned claims for the repayment of a charge which had been levied under Italian legislation which was inconsistent with EU law. A preliminary issue before the national court was whether the claims fell . .
CitedLittlewoods Retail Ltd and Others v Her Majesty’s Commissioners of Revenue and Customs ECJ 19-Jul-2012
(Grand Chamber) Second and Sixth VAT Directives – Input tax – Refund of excess – Payment of interest – Procedures
The court considered whether on repayment to a taxpayer of wrongly imposed VAT, the interest returned with the repayment should be . .
CitedThe Child Poverty Action Group v Secretary of State for Work and Pensions SC 8-Dec-2010
The Action Group had obtained a declaration that, where an overpayment of benefits had arisen due to a miscalculation by the officers of the Department, any process of recovering the overpayment must be by the Act, and that the Department could not . .
CitedTFL Management Services Ltd v Lloyds Bank Plc CA 14-Nov-2013
The court was asked: ‘A spends money seeking a judgment for the recovery of a debt from B. A fails to recover the debt because, so the court holds, the debt is not in fact owed by B to A (as A mistakenly thought), but owed by B to C. C then recovers . .
CitedRelfo Ltd (In Liquidation) v Varsani CA 28-Mar-2014
. .
CitedBank of Cyprus UK Ltd v Menelaou SC 4-Nov-2015
The bank customers, now appellants, redeemed a mortgage over their property, and the property was transferred to family members, who in turn borrowed from the same lender. A bank employee simply changed the name on the mortgage. This was ineffective . .
CitedRuabon Steamship Co v The London Assurance Co HL 1900
Lord Halisbury said: ‘I cannot understand how it can be asserted that it is part of the common law that where one person gets some advantage from the act of another, a right of contribution towards the expense from that act arises.’ Rejecting the . .
CitedMenelaou v Bank of Cyprus UK Ltd CA 19-Jun-2013
The Court was asked questions about the law of unjust enrichment, and one of the remedies which may be granted to reverse the effect of unjust enrichment, namely subrogation to an unpaid vendor’s lien. The bank had released its charges over property . .
CitedBurston Finance Ltd v Speirway Ltd ChD 1974
Walton J described the typical case of subrogation: ‘What is the basis of the doctrine of subrogation? It is simply that, where A’s money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having . .
Cited123 East Fifty-Fourth Street Inc v United States 1946
(Learned Hand J dissenting) The majority affirmed a judgment for refund of cabaret taxes improperly levied in the erroneous belief that the taxpayer’s establishment qualified as a cabaret. The majority held that the limitation statute, in its then . .
CitedHanover Shoe Inc v United Shoe Machinery Corporation 14-Oct-1968
United States Supreme Court . .
CitedBarclays Bank Ltd v Quistclose Investments Ltd; etc HL 31-Oct-1968
R Ltd were in serious financial difficulties. The company’s overdraft with the appellant bank was almost twice its permitted limit. The company sought a loan of 1 million pounds from a financier, who was willing to lend the company that sum provided . .
CitedAmministrazione Delle Finanze Dello Stato v Spa San Giorgio ECJ 9-Nov-1983
ECJ Questions submitted for a preliminary ruling – reference to the court – right of every national court – stage of the proceedings before the national court – nature of the decision to be given by the national . .
CitedAbbey National Building Society v Cann HL 29-Mar-1990
Registered land was bought with an advance from the plaintiff. The transfer and charge were registered one month later, but in the meantime, the buyer’s parents moved in. When the buyer defaulted, his mother resisted possession proceedings, saying . .
CitedCommissioner of State Revenue v The Royal Insurance Australia Ltd 7-Dec-1994
(High Court of Australia) A payment had been made under statute which was later repealed with retrospective effect.
Held: The monies paid under the retrospectively repealed statute had not been paid under a mistake of law at common law. . .
CitedKleinwort Benson Ltd v Birmingham City Council CA 20-May-1996
No defence of unjust enrichment was available to defend a claim on a failed interest rate swap agreement. . .
CitedKleinwort Benson Ltd v Lincoln City Council etc HL 29-Jul-1998
Right of Recovery of Money Paid under Mistake
Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap . .
CitedVDP Dental Laboratory v Staatssecretaris van Financien ECJ 26-Feb-2015
Reference for a preliminary ruling – Value added tax – Deductions – Exemptions – Supplies of dental prostheses . .
CitedMonro v HM Revenue and Customs CA 9-Apr-2008
The Commissioners conceded that, in principle, there could be a common law right to recover sums paid by way of tax under a mistake of law, but argued that such a claim was precluded because it would be inconsistent with the statutory scheme under . .
CitedKingstreet Investments Ltd v New Brunswick (Finance) Ltd 11-Jan-2007
(Supreme Court of Canada) . .
CitedBritish Columbia v Canadian Forest Products Ltd 11-Jun-2004
Canlii Damages – Environmental damages to public lands – Compensation – Forest fire – Valuation of loss of harvestable trees, and of non-harvestable trees in environmentally sensitive areas – Appropriate basis to . .
CitedEquuscorp Pty Ltd v Haxton 8-Mar-2012
High Court of Australia – Restitution – Restitution of benefits derived from unenforceable or illegal contracts – Recovery of money paid as money had and received – Respondents invested in tax driven blueberry farming schemes – Respondents borrowed . .
CitedLittlewoods Retail Ltd and Others v HM Revenue and Customs (No 2) ChD 28-Mar-2014
The claimants had recovered very substantial overpayments made of VAT. They sought recovery of compound interest. The ECJ, on reference, said that this was a matter for national law.
Held: The claim succeeded. The sections of the 1994 Act were . .

Cited by:
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The appellants had overpaid under a mistake of law very substantial sums in VAT over several years. The excess had been repaid, but with simple interest and not compound interest, which the now claimed (together with other taxpayers amounting to 17 . .
CitedLowick Rose Llp v Swynson Ltd and Another SC 11-Apr-2017
Losses arose from the misvaluation of a company before its purchase. The respondent had funded the purchase, relying upon a valuation by the predecessor of the appellant firm of accountants. Further advances had been made when the true situation was . .
CitedPrudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .

Lists of cited by and citing cases may be incomplete.
Updated: 10 August 2021; Ref: scu.581647