Andrew Needham looks at the claiming back of overpaid VAT from HMRC and their defence of unjust enrichment.
Unjust enrichment occurs when a business charges VAT in error but passes on the economic burden to its customer. In simple terms, this means that a business charged VAT on top of its price rather than accounting for VAT out of its income.
HMRC’s approach
HMRC can refuse the repayment of overpaid VAT on the grounds that the business would be unjustly enriched by repayment of the overpaid VAT because the VAT should correctly be returned to the customer who bore the economic burden of the overcharged VAT.
The defence of unjust enrichment has only been open to HMRC since 1 January 1990 when the legislation was amended (VATA 1994, s 80) following C&E Commrs v Fine Art Developments plc (1989) 4 BVC 26, and restrictions on the liability of the then
