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Mr Laurence Rabinowitz QC, Mr Andrew Hitchmough and Mr Steven Elliott (instructed by PricewaterhouseCoopers Legal LLP) for the Claimants Mr Jonathan Swift QC and Mr Andrew Macnab (instructed by the Solicitor for HMRC) for the Defendants Hearing dates: 18, 19, 20, 23, 24 May 2011 ____________________
By virtue of subsection (4), HMRC shall not be liable on a claim to credit an amount to a person under subsection (1) "if the claim is made more than 3 years after the relevant date", the relevant date being the end of the prescribed accounting period mentioned in subsection (1)(a).
As Professor Andrew Burrows QC says in The Law of Restitution , 3 rd edition (2011), at p.27, if the first three questions are answered affirmatively, and the fourth negatively, the claimant will be entitled to restitution. He adds that these four elements "constitute the fundamental conceptual structure of an unjust enrichment claim".
It is apparent from these provisions that there is a right, but not an obligation, to deduct allowable input tax from any output tax that is due from a taxpayer; and that if the amount of the credit for the input tax exceeds the amount of the output tax that is due, HMRC are then obliged (upon the making of a claim in the prescribed manner) to pay the amount of the excess to the taxpayer. Taxpayers who regularly find themselves in this position, for example because their main taxable supplies are zero-rated, are generally known as "repayment traders".
Mr Marshall was counsel for Mrs Filby, and his submission on tracing to which May LJ referred was that Mortgage Express could not trace a proprietary right to or into the Midland Bank account, because the money was by then Mr Filby's: see the judgment at [18]. Thus, even on the supposition that the money belonged beneficially to Mr Filby when it was paid to Midland Bank, May LJ would nevertheless have held that the "at the expense of" test was satisfied, because the "reality" still was that it was the money of Mortgage Express which was being so used. To similar effect, May LJ said at [62]:
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