Tax due on repayment

The taxpayer made a voluntary disclosure under VATA 1994 s 80 for repayment of output VAT on supplies of hot drinks to May 1984. HMRC made the repayment with simple interest. The taxpayer later claimed compound interest on the repayment but this has been stayed pending the final outcome of the Littlewoods litigation.

HMRC imposed corporation tax on the VAT repayment and interest payment. The taxpayer appealed.

The First-tier Tribunal noted that the Court of Appeal’s decision in Shop Direct Group v CRC [2014] STC 1383 confirmed that HMRC were entitled to tax such sums but had considered only the domestic law arguments. The instant appeal was based entirely on EU law.

The taxpayer’s argument was: “It is a basic of the law of restitution that the party unjustly enriched should disgorge all the benefits which he has received. Where the enrichee is the...