Repayment of output tax and unjust enrichment

Anglian Water was appointed as a water and sewerage undertaker for the Anglian region in 1989 as part of the privatisation of the water industry. It claimed a repayment of VAT wrongly charged to customers in relation to infrastructure charges. These were set by the regulator and HMRC accepted the supplies were outside the scope of VAT. It refused the claim however on the basis of unjust enrichment under VATA 1994 s 80(3).

The First-tier Tribunal dismissed the taxpayer’s appeal. It found there was enough evidence for HMRC to make out its case that the maximum infrastructure charge set by the regulator was not affected by the charge to VAT.

The Upper Tribunal said it was for HMRC to establish the defence of unjust enrichment. The issue therefore was whether the lower tribunal had erred in law in concluding that HMRC had made out the defence. The...