A Premier case for VAT recovery insolvency

A Premier case for VAT recovery insolvency

Tax analysis: Why is the Premier Foods case so important for the future of VAT recovery in insolvency situations? Timothy Jarvis, partner at Squire Patton Boggs, explores the details of this case and argues that the result is potentially exciting news for customers in insolvency situations who have been incorrectly charged VAT.

R (on the application of Premier Foods (Holdings) Ltd) v Revenue and Customs Commissioners, [2015] EWHC 1483 (Admin), [2015] All ER (D) 205 (May)

The claimant erroneously paid approximately £4m VAT to the interested party (QCL), which it paid to the defendant Revenue and Customs Commissioners. The claimant contended that HMRC should refuse to repay QCL, which subsequently went into administration, unless it undertook to reimburse it in full, but HMRC refused and the claimant sought judicial review. The Administrative Court, in allowing the application, held that Reemtsma Cigarettenfabriken GmbH v Finance Minister: C-35/05 [2007] All ER (D) 266 (Mar) applied, such that the claimant was entitled to recover the mistakenly paid VAT directly from HMRC.

What is interesting about the litigation brought by Premier?

The litigation brought by Premier relates to VAT that was incorrectly charged to it by a supplier. Normally when a customer, such as Premier, is incorrectly charged VAT by its supplier the customer's remedy is a common law restitution claim against the supplier--with the supplier having a statutory right of recovery against the taxation authority in respect of the VAT. However, in Reemtsma Cigarettenfabriken GmbH v Finance Minister the Court of Justice of the European Union (CJEU) acknowledged that this principle did not apply in all circumstances and in some circumstances the customer could have recourse directly to the taxation authority. The CJEU held:

'If reimbursement of the VAT becomes impossible or excessively difficult, in particular in the case of the insolvency of the supplier, these principles may require that the recipient of the services

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