Inventive Tax Strategies and others v HMRC

In Inventive Tax Strategies and others v HMRC [2017] UKFTT 667 (5 September 2017) the FTT found that the customer’s legal entitlement to a refund is not sufficient to reduce the taxable amount and create a right to a repayment of VAT until the refund is actually paid to the customer.

The appellants were four companies which were either in administration or in liquidation. Before becoming insolvent they had sold tax avoidance schemes in particular SDLT mainly to individuals. All the schemes had failed and the looming obligation to repay all the fees charged to customers had caused the appellants’ insolvency.

At the directions of their administrators/liquidators the appellants had issued credit notes representing the fees due back to their clients. They had been unable to make any refunds dues to lack of funds. Taking the view that there had been a ‘decrease...