03 0153 PENELOPE ANNE COWDY Mrs E Gilliland Mrs G Pratt York 26 February Mr John Martin, solicitor, for the Appellant Mr Richard Shaw of the Solicitors Office of H M Customs and Excise for the Respondents 
	Vat – unjust enrichment – claimant proposed to pay whole of reimbursement to accountants – accountants would make payment to Vat payers less their fees – held benefit to claimant – appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

 
 	
	PENELOPE ANNE COWDY	Appellant
	(TRADING AS BERRIEWOOD FARM)

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Mrs E Gilliland (Chairman)
						 Mrs G Pratt (Member)	

Sitting in public in York on 26 February 2004

Mr John Martin, solicitor, for the Appellant

Mr Richard Shaw of the Solicitors Office of H M Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	The appeal before us concerns legislation and regulations relating to unjust enrichment as they arise in respect of a Vat repayment claim.  The Appellant is Penelope Anne Cowdy who trades as a riding school and livery yard under the name of Berriewood Farm.She became aware of a right to reclaim a refund of Vat paid in the operation of her business and took professional advice on this from Prince-Martin & Co. Ltd. Accountants and Vat Consultants.  Mr. John Martin of that company has attended to represent the Appellant at today’s hearing.                                                                      
2.	The Commissioners accepted the Appellant’s claim so far as tuition fees were concerned and a repayment we understand has been made and thus that aspect of the matter does not concern us today.  The issue rather relates to the livery services provided by the Appellant to customers and in respect of which over a period Vat had been accounted for.  It was accepted by the Commissioners that while the claim was recognised because of the need to avoid any “unjust enrichment” being afforded to the Appellant a particular procedure would have to be followed as to repayment.  The Commissioners’ stance was that they needed to make arrangements to ensure that if repaid the sums representing Vat would go to the persons who bore the original cost.

3.	The Appellant was not seeking personally any refund in respect of the livery charges.  However it had been Prince-Martin & Co. Ltd. who had submitted the voluntary disclosure forms on the Appellant’s behalf to the Commissioners together with a number of pages of calculations to a net claim of £22666.00. Mr. Martin has told us in his summary of case that due to the complexity of the work the Appellant had thought it beyond her capability to do and thus had appointed Prince- Martin & Co.Ltd. to do it.  They had agreed and confirmed that their fee would be based on a percentage of the refund obtained.  It had been agreed Mr. Martin had stated that  they would approach each livery customer with a view to acting as their agent in respect of the claim.

4.	In the Notice of Appeal submitted by Mr. Martin for the Appellant on  11 February 2003 the approximate amount in dispute was put at £15625 the balance of the original claim  (the tuition fees) having been dealt with. The grounds of appeal were that the Commissioners had as part of the procedure for repayment sought from the Appellant an undertaking that she would refund all moneys received by her to her customers.  The arrangements that she and Prince-Martin wished to follow were that she would pay the whole of the repayment moneys to them and they would make payments to her  individual customers. It is not disputed that these payments would not be of the full amount of the entitlement of each to the Vat refund but less the deduction of a fee, we understand, of 20%.  We are told that Prince-Martin & Co. Ltd. have an agency agreement with each livery customer and that each has agreed the arrangement and presumably the deduction of the fee. However no copy agreements have been produced to us.

5.	Mr. Martin has submitted that the Appellant herself is not being unjustly enriched by a procedure that will give her no monetary payment.  Indeed he has contended that if the Appellant were to divide the funds between her customers in the full amount without deduction and subsequently Prince-Martin  & Co. Ltd. liaised with each direct to obtain payment of their fees this would infringe neither legislation nor regulations. It has been conceded by the Commissioners that this is the case. However it is not a route which to date has been followed.  It has been submitted that the payment in full to Prince-Martin by the Appellant would be made to them as agents of her customers. 
                     
6.	Section 80(3) of the Value Added Tax Act 1994(the Act) provides under the section heading of  “Recovery of overpaid Vat” as follows: 
“It shall be a defence, in relation to a claim under this section, that repayment of an amount would unjustly enrich the claimant.” 
The claim is to be made “ …in such form and manner and shall be supported by such documentary evidence as the Commissioners may prescribe by regulations;…(80(6).
The relevant regulations are Vat Regulations SI 1995 2518 reg. 43 C which details provisions to be included in reimbursement arrangements and 43 G which deals with undertakings. Regulation 43 C (b) states: “no deduction will be made from the relevant amount by way of fee or charge (howsoever expressed or effected;) and 43 C (a) provides : “ reimbursement will be made only in cash or by cheque”. 

7.	Mr. Martin has told us that the Appellant never refused to sign the form of undertaking required by the Commissioners but saw no purpose in signing an undertaking where the proposed arrangements were unacceptable to the Commissioners.  We do not accept Mr. Martin’s submission that the Commissioners have adopted too narrow an interpretation of the law.  It seems to us quite clear that the livery customers (“the consumers”) are to be repaid in full; there is to be no deduction by way of fee or charge; and indeed no repayment in kind. In invoking the defence of unjust enrichment the Commissioners must establish that someone other than the claimant effectively bore the burden of the Vat. This has been established.  The claimant has not suffered economic loss.  There has been a benefit to her in that the pursuit of the claim under the planned arrangements would place on her no obligation to meet the costs she chose to incur through instructing Prince-Martin.  Those instructions originally came from her.  Whatever the agency arrangements between the livery customers and Prince-Martin they are “the consumers” “who have, for practical purposes, borne the whole… of the cost of the original payment [of the relevant Vat amount] to the Commissioners.” (Reg.43 A (b) ) and are entitled to receive the same under the reimbursement  arrangements. Mr. Martin has said that had the calculations not been done for her, the Appellant would not have made the claim.  The Appellant has not been here to give evidence on that but the reality is that Vat was overpaid and was repayable and in her letter before us of 18 May 2002 the Appellant recorded that there was pressure from her clients to resolve the matter. That however does not entitle the Appellant to receive the refund and then facilitate deductions from it.

8.	The appeal is dismissed.

9.	The Commissioners have not sought costs and we make no direction as to costs.

MRS E GILLILAND
CHAIRMAN
MAN/03/0153