No refunds had been made

The taxpayer supplied training courses which were standard rated and went into liquidation in September 2012. On its final VAT return to September 2012 the liquidators included a negative entry of £744 324 for output tax on the basis that output tax could be adjusted on prepaid fees received from students because there had been ‘no supply’ of the courses in question. Output tax had been previously declared on the prepayments received.

The liquidators issued about 4 000 credit notes to students between April and June 2015 backdated to September 2012. Their main argument was that the original output tax declared on earlier returns could now be credited because no services had been provided to the students.

HMRC said that the taxpayer had received consideration for the courses and had not made any refunds so the output tax declarations were correct. It also seemed that there...