Investment Trust Companies – UK Supreme Court indicates that investment funds had valid unjust enrichment claims against suppliers who had charged VAT on exempt supplies
Using Lord Reed’s simplified facts, the invoice to an investment fund of its manager included VAT of £100 based on a UK VAT provision which was later determined to have improperly treated (contrary to the EU Directive) the manager’s services as taxable rather than exempt. The manager claimed input tax (i.e., an ITC) of £25 in the same mistaken belief that it was making taxable supplies, and remitted £75 to HMRC. Recovery of the £75 from HMRC was now statute-barred.
Lord Reed held that the fund had no common law claim of £75 against HMRC for unjust enrichment given inter alia that the manager’s supposed £75 remittance obligation to HMRC had been independent of its £100 charge to the fund in the sense that the former was triggered by the provision of its services rather than the receipt of the £100 from the fund. However, the fund had a valid £25 claim for unjust enrichment against the manager.
Analogous Canadian facts would arise where the two year deadline for the fund to request a refund from the manager under ETA s. 232 or to make a refund application to CRA under s. 261 had passed, and the manager’s return could not be reopened.
Neal Armstrong. Summary of HMR Commissioners v Investment Trust Companies (in liquidation),  UKSC 29 under General Concepts – Unjust Enrichment.