Investment Trust Companies v Revenue and Customs Comrs [2017] UKSC 29

‘The claimants were “closed-ended” investment funds constituted as limited companies. Between 1992 and 2002 they received supplies of services from investment managers rendered pursuant to agreements which provided for the managers to be remunerated by the payment of fees plus VAT “if applicable”. Under the legislation then in force such services did not qualify for exemption and the managers charged VAT at the standard rate. The managers made periodic VAT returns which accounted for the VAT charged as output tax, reclaimed input tax and paid the revenue the net difference. Following a decision of the Court of Justice of the European Union it transpired that the supplies of the investment management services should have been exempt from VAT. Accordingly, the managers made claims to the revenue under section 80 of the Value Added Tax Act 1994 for repayment of sums accounted for and paid by them in error. The revenue met those claims but, in accordance with the statutory provisions, limited repayments to the net amounts which the managers had paid and did not include any amounts relating to periods which were time-barred. The managers forwarded the reimbursements to the claimants as required under section 80 but since they were insufficient to meet the full amount of VAT which had been mistakenly paid by them the claimants brought proceedings against the revenue on grounds of unjust enrichment and breach of European Union law. The judge found that the revenue had been enriched by the full amount of VAT paid by the claimants to the managers; that the claimants had no cause of action at common law because the statutory scheme protected the revenue from any liability to refund VAT except as provided for under section 80 of the 1994 Act, but that, since, within the limitation period, European Union law required that exclusion to be disapplied, the claimants were entitled to repayment of the full amount of VAT paid by the claimants within that period. The claim in relation to the time-barred periods was therefore dismissed. On appeal by both parties the Court of Appeal concluded that the statutory scheme did not exclude a common law claim but that, since the revenue had only received payment of output tax net of input tax from the managers, it had not been unjustly enriched over the periods in which a refund had been paid to the managers, although a similar repayment was payable to cover the time-barred periods.’

WLR Daily, 11th April 2017

Source: www.iclr.co.uk