Before any refunds are made to businesses which decide to use
the scheme, regulations 10 to 15 require them to sign an
undertaking. So that a business can decide whether it wants to
operate the scheme you should send it a copy of the explanatory
notes and draft undertaking which can be found in
APD13600.
The requirements contained in the undertaking are necessary
to ensure that any business will not be unjustly enriched by
receiving a refund under the scheme. Without being able to identify
the consumers who will qualify for a refund, undertakings do not
achieve their purpose. Furthermore, it is reasonable for businesses
to give an assurance that the money can and will be refunded.
If, for some reason, we refuse to accept an undertaking, then
under Schedule 5, paragraph 19(3) of the Finance Act 1997 the
affected business can have the decision reviewed by us, and can
then appeal to the VAT and Duties Tribunal.
We consider 90 days to be a reasonable time for businesses to
pass refunds to consumers, and would normally expect businesses to
have their scheme ready to implement by the time we receive their
signed undertaking.
In certain cases it may not be possible to make the refund in
90 days because the business initially wrote to consumers to see
whether their address was correct. If 90 days is not long enough to
refund all the money and you are satisfied that genuine efforts are
being made to reimburse consumers, that is many have already
received their money, then you can exercise your discretion and
allow a slightly longer period, perhaps one month. However, no open
ended extension should be given. If after the extension the
business has failed to locate the final consumers, we should take
it that they are not interested in getting a refund.
As the intention is to refund money to consumers and the business does not benefit, any monies not repaid need to be returned to us promptly. Businesses are under an obligation to do this without waiting to be asked, but if they have not done so after 14 days we have the power to issue an assessment. It must be remembered that this money is not the business’s property and is certainly not an interest free loan from the Government and therefore must be returned promptly. 14 days seems a reasonable time for businesses to do this.
There is clearly a need for claimants to keep records so that we
can check that the money has been refunded and that it has been
returned to the right consumers. Regulation 13 requires traders to
keep records of any refunds made. However, the records to be kept
are basic and only what we would expect any business to keep in the
circumstances. If the claimant’s existing records are capable
of showing when a refund has been made, no additional records need
be kept. The important point is ensuring that there is a visible
audit trail we can follow and check.
It is appreciated that the amount of money refunded to
consumers might not always equal the amount of tax, for example,
because the amount was apportioned. As far as the amount of
interest is concerned, we would in practice, wish claimants to note
the rate(s) of interest used.
Once procedures have been agreed, a formal copy of the undertaking set out in APD13600 should be sent to the business for signature. But remember, before the undertaking is finally agreed we would expect businesses to have their schemes and information prepared and to begin contacting consumers as soon as the refund is made. Although we don’t expect you to check this, if there is any reason to believe that the business having signed the undertaking is unable to meet its obligations, then you should ask to see details of the scheme before agreeing to accept it. No refund must be made until you receive the undertaking.
Regulation 14 requires us to give written notice that we wish to
see the scheme records. The date and venue should, if at all
possible, be agreed between the record holder and the visiting
officer. Such a visit will normally be entirely separate from the
normal assurance visit. We envisage only one visit being necessary,
although there may be occasions when a number are needed. If an
assurance visit is due there is no reason why the scheme records
should not be checked at the same time. However, the notice must
have been sent to the claimant before the records can be checked.
Once the 90 day refund period has expired, businesses have 14
days in which to return any surplus monies to us. Soon after the 14
days has expired you should contact the business to find out
whether all the monies have been reimbursed to their customers. The
business should be visited to check that the monies have been
refunded to customers in the agreed manner. Telephone assurances
that the refunds have been made are not to be accepted.
