What are reimbursement arrangements under section 80A of the Value Added Tax Act 1994?

Reimbursement arrangements are formal plans established by a business claiming overpaid VAT under section 80 to pass refunded amounts back to the customers or persons who actually bore the economic cost of the overcharged VAT, thereby preventing the claimant from being unjustly enriched by the refund from HMRC.

What requirements can HMRC regulations impose on VAT reimbursement arrangements?

HMRC regulations can prescribe deadlines for reimbursing customers after receiving a VAT credit, require repayment of shortfalls to HMRC if the full amount is not passed on, mandate that interest payments are treated the same as the principal sum, and oblige businesses to keep detailed records and make them available to HMRC on request.

Can HMRC apply reimbursement regulations retrospectively to existing VAT claims?

Yes, under section 80A the regulations can apply retrospectively. They can govern the crediting of amounts after the regulations are made, even where the original VAT claim or the reimbursement arrangements themselves were established before the regulations came into force, and regardless of when the credit claim was submitted.

What happens if a business fails to comply with reimbursement arrangement requirements?

If a reimbursement arrangement does not meet the regulatory requirements or is not supported by the necessary formal undertakings to HMRC, the arrangement is disregarded. This means HMRC retains the unjust enrichment defence under section 80(3) and can refuse the VAT credit claim. Any shortfall in reimbursement must be repaid to HMRC.

Value Added Tax Act 1994 section 80A

Arrangements for reimbursing customers

Section 80A gives HMRC the power to make regulations governing how businesses must set up and operate reimbursement arrangements when claiming back overpaid or overstated VAT, to ensure that the people who actually bore the cost of the VAT are properly reimbursed and that the claimant is not unjustly enriched.

HMRC can make regulations that cause reimbursement arrangements to be disregarded for the unjust enrichment defence under section 80(3), unless the arrangements meet specific regulatory requirements and are backed by formal undertakings given to HMRC
Reimbursement arrangements are plans put in place by a claimant under section 80 to avoid being unjustly enriched, by passing refunded amounts back to those who actually bore the cost of the overpaid or overaccounted VAT
Regulations may prescribe detailed requirements for these arrangements, including time limits for making reimbursements, treatment of HMRC interest payments, handling of shortfalls where the full amount is not reimbursed, and obligations to keep and produce records
The regulations can apply retrospectively to arrangements already in place before the regulations were made, and take effect regardless of when the original credit claim was submitted

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member