UK Case Law

In Coin-A-Drink Limited v HMRC, the taxpayer lost its appeal against the finding by the First Tier Tribunal that a repayment of overpaid VAT plus interest from HMRC was properly subject to corporation tax.  The taxpayer sought to argue that if corporation tax was charged on the repayment amount, it would undermine the European law requirement for effective remedy because the taxpayer would not have received a full repayment of the overpaid VAT.  The Upper Tier Tribunal held (applying the general principles set out in the recent Supreme Court decision in the case of Shop Direct Group v HMRC) that the taxpayer was incorrect in its assertion that the repayment of the overpaid VAT and the corporation tax charge should be combined when determining if the taxpayer received an effective remedy in respect of the overpaid VAT as the corporation tax was imposed on the profits generated by the receipt of the repayment from HMRC, rather than the repayment itself.  As such, there were no grounds for arguing that the normal tax rules should not apply to restitutitonary payments.