Bearing the burden

The claimant company was a major producer of grocery products. It paid about £4m VAT to supplier Q Cold Ltd (QLC; now in administration) which had invoiced the sum in error and accounted for it to HMRC. The supplies should have been zero rated.

The claimant had no statutory right to the VAT from the Revenue. Only QCL had the right under VATA 1984 s 80 and the business made a claim.

The grocery company said the tax department could rectify the situation by refusing to make a payment to QCL unless it agreed to reimburse the full amount of the repayment to the claimant.  If the supplier refused HMRC ought to make the repayment directly as permitted under EU law.

The Revenue disagreed. It proposed to repay the VAT to QCL in administration which never bore the burden of the VAT and from...