Where a business has accounted for too much VAT and makes a claim to recover it, HM Revenue & Customs (HMRC) can refuse to pay that claim if they can show that payment would unjustly enrich the claimant. However, until the law was changed in 2005, this unjust enrichment defence could only be used against a specific category of claimants. This meant that it was possible that a claim by one business could be refused whilst a similar claim from another business could not.
Marks & Spencer fell within the former category and challenged the discriminatory nature of the legislation.
In light of the House of Lords judgment, issued on 4 February 2009, the unjust enrichment defence will no longer be used against any claim made before 26 May 2005 (the date on which the law was amended to remove the discrimination referred to above).
Claims made before 26 May 2005 that were refused by HMRC on the grounds of unjust enrichment and have still not been settled will now be paid, subject to verification. Claims where the unjust enrichment defence was not challenged or was upheld, in the courts, may be resubmitted for consideration, subject to the relevant time limits.
As a result of the change in the law made in the Finance (No. 2) Act 2005, which applies the unjust enrichment defence to all categories of claimants, the judgment of the House of Lords does not affect any claim made on or after 26 May 2005.
Issued 18 February 2009