The English High Court has ruled that EU law requires end consumers to be given directly effective rights to recover unlawfully levied VAT from HMRC in circumstances where those end consumers have paid VAT on invoices from suppliers but have not directly accounted for overpaid VAT to HMRC (Investment Trust Companies (in Liquidation) v HMRC [2012] EWHC 458 (Ch)).

In Case C-363/05 JP Morgan Fleming Claverhouse Investment Trust plc, The Association of Investment Trust Companies v HMRC, the CJEU held that the management fees charged to investment trust companies (ITCs) should be exempt from VAT in accordance with the former Article 13B(d)(6) of the Sixth VAT Directive.  Prior to this judgment, the UK had treated management fees chargeable to ITCs as subject to VAT.  Many fund managers made claims directly to HMRC for the unlawfully levied VAT, who in turn repaid this VAT to ITCs which had made claims against them.  For various reasons connected with limitation periods and insolvency of some fund managers, certain ITCs were not able to recover the VAT directly from managers.  However, the High Court has held, subject to limitation periods, that in the light of Case C-94/10 Danfoss A/S, Sauer-Danfoss ApS v Skattmnistreit, EU law requires the claimants to be given a direct remedy to recover the unlawfully levied VAT directly from HMRC because it had proved impossible or excessively difficult for them to recover the VAT from suppliers.

Although this litigation is on-going in the UK, it is clear that EU law does require the tax authorities to repay unduly levied VAT in certain circumstances where it is impossible or excessively difficult for the end consumer to recover it directly from the supplier.  Opportunities of this nature may arise in other EU member states where, as in theClaverhouse litigation, national law levies VAT on supplies in breach of EU law.