Deposit belongs to company

The company sold chemicals in returnable containers. On returning the containers customers were entitled to a refundable deposit.

Some 20% of clients did not return them and the company included the unclaimed credits in its profit and loss accounts.

Following the decision in Anise Ltd (SpC 364) in which it was held that overpayments from customers were not trading receipts the company made an error or mistake claim under FA 1998 Sch 18 para 51 in respect of unclaimed credits.

HMRC refused the claim saying that the unclaimed deposits were a normal incident of trade. The company appealed.

The Special Commissioner said that the deposit was a trading receipt.

The company knew that approximately 20% of deposits would not be repaid therefore it could not say that it was holding the deposit for the customer.

However as 80% of the deposits would be repaid...