100. Unjust enrichment

Summary

This section provides that an accountable person is entitled to claim VAT overpaid incorrectly. However, Revenue will not repay a claim if repayment would lead to the unjust enrichment of the claimant.

Basically, unjust enrichment occurs where a person would get a windfall gain if repaid the tax that was paid in error. This happens in circumstances where the cost of the overpaid tax was actually passed on to the person’s customers in the price charged for goods and services. Revenue will not repay tax that has already been passed on in whole or in part to the customer.

The section, however, allows for compensation to a trader for loss of business due to the incorrect application of VAT in certain circumstances, even where the cost of the overpaid tax was passed on to the trader’s customers. If a trader can establish a loss of business, he or she will be entitled to a refund of the part of the overpaid tax that would compensate for any associated loss of profits.

Finally, the section provides that where a trader undertakes to reimburse the customers who have actually borne the cost of the overpaid tax, Revenue will refund the VAT claimed. Before a refund is made, the trader must have adequate arrangements in place to reimburse those customers. Any trader who does not reimburse customers within 30 days of receiving a refund must pay the amount not reimbursed back to Revenue.

Details

(1) An accountable person has a right to a refund of any tax overpaid as a result of a mistaken assumption, unless Revenue determines that the amount or any portion of the amount claimed would give rise to unjust enrichment.

The mistaken assumption could result in these circumstances:

• (1)(a) a person could account for an amount of tax that was not properly due, for example, a person may have charged VAT at the standard rate on the supply of a particular service when the 13.5% rate should have been charged.
• (1)(b) a person’s supplies may have been treated incorrectly as exempt from VAT and accordingly the person did not submit a VAT return in respect of a repayment that was due to him or her.
• (1)(c) a person did not deduct an amount of VAT in respect of ‘qualifying activities’ as defined in section 59(1).

(2)(a) A claimant, when submitting a claim for a refund of overpaid tax to Revenue, must provide full details in writing of the circumstances of the case together with a calculation of the amount of tax due for each taxable period covered by the claim.

(2)(b) In addition, a claimant is required to submit such documentation in support of a claim as is requested by Revenue. It is not appropriate in a “mistaken assumption” case to make a claim on a normal VAT return.

(3) In determining whether a refund would give rise to unjust enrichment of a claimant, Revenue must establish the extent to which the cost of the overpaid amount has been passed on in the price charged on goods or services to the customer. In order to do this, Revenue must take account of any loss of profit suffered by the claimant, based on Revenue’s own analysis and on any information provided to them by the claimant.

(4) Where Revenue has determined that a refund or a partial refund of tax would not give rise to unjust enrichment of the claimant, then that refund or partial refund will be made.

(5) Where a trader undertakes to reimburse the overpaid tax to his or her original customers, Revenue will refund the amount of VAT claimed plus interest, in accordance with section 105, provided they are satisfied that the trader has arrangements in place to identify and reimburse the customers.

(6) A trader who fails to reimburse his or her customers within 30 days of receiving the refund is liable to repay that amount of refund to Revenue.

Relevant Date: Finance Act 2020