Taxable repayment

Liability of VAT repayment

The taxpayer made a voluntary disclosure under VATA 1994 s 80 for repayment of output VAT on supplies of hot drinks for the period from 1973 to May 1984. HMRC made the repayment with simple interest but imposed corporation tax on both.

The First-tier Tribunal dismissed the taxpayer’s appeal and the matter progressed to the Upper Tribunal.

The judges agreed with HMRC. They said ‘the primary flaw’ in the taxpayer’s argument was to treat tax on profits as if it were a deduction from the repayment. ‘The profits whatever their derivation shown in Coin-a-drink’s accounts are taxable because they are profits. The accounts themselves recognised them as profits again because that is what they were.’ They said the tax was determined by the ordinary corporation tax rules and the fact that part of the taxable profit was derived from a VAT...