Right of set off by HMRC of one tax against another tax

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Right of set off by HMRC of one tax against another tax.

The question dealt within  in this case by the Chancery  Division is often raised and concerns Crown right of set off. In this case the trader was owed VAT by HMRC, but the trader also owed an amount to HMRC in respect of other taxes.

HMRC claimed it could set one off against the other. The Court held that the test for equitable set-off was whether a cross claim by HMRC was so closely connected with the traders demand for a refund that it would be manifestly unjust to allow the trader to enforce payment without taking into account the cross claim. The liability to pay VAT and corporation tax arose under two different statutes.

It is important for companies to act in a timely manner to defend debts.

In VAT law there was an express right to set-off credits and debits. There was no evidence as to a corresponding right in relation to corporation tax. In those circumstances the Court held that the claim of HMRC to set off corporation tax and PAYE against a repayment of VAT had to be rejected.



About MIJ

Monty is a consultant to the Litigation Department in Jeffrey Green Russell Solicitors with over 5 years’ litigation experience and 7 years’ commercial experience in sales and operations management, both domestic and international. Over the last 10 years Monty has dealt with HM Revenue & Customs in a management environment in relation to all taxation issues affecting the companies he has worked with. Through Monty's exposure to indirect and direct tax issues, he has developed an understanding of how HMRC's policies affect UK businesses. Monty assists businesses in the preparation and development of strategies for litigating claims against HMRC. His commercial and litigation experience is unique and an asset to his clients.

Monty specialises in tax litigation. He is results driven with a broad commercial acumen. His extensive knowledge of domestic and international businesses, compliance work, including designing and implementing due diligence procedures, places him in a unique position to assist clients on evidence and strategy. Monty has a proven record of success in change management and a solid background in multi-site general management. Monty was one of very few individuals to be given the opportunity to give evidence before the inquiry into Missing Trader Intra-Community (MTIC) fraud in the UK in January 2007, which was conducted by the House of Lords Select Committee on the European Union (Sub-Committee A - Economic and Financial Affairs, and International Trade).

Monty was formerly a professional cricketer having played international cricket for East and Central Africa in the 1997 ICC Mini World Cup Trophy, and having played professional cricket in many parts of the world including Australia, Derbyshire, UAE and Canada.

Monty is a qualified English Cricket Board Level 1 coach and is currently playing in the Middlesex County League for Harrow Cricket Club. Monty's International Cricket Profile can be accessed by visiting http://content-usa.cricinfo.com/other/content/player/24013.html.

Monty is fluent in Swahili, Hindi and Gujarati and also speaks basic Arabic.  


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18th May 2012 09:23

Case reference?
Thanks for the commentary on an intereting decision Monty, but could you give us a citation or link so that we can have a look at the detailed arguments and points on which the case was decided?

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11th Feb 2013 12:52

Right of set off by HMRC of one tax against another tax

I believe that this case is Emblaze Mobility Solutions Ltd v HMRC (2012) EWHC which concerned a set off of a VAT repayment against historic tax liabilities including Corporation Tax and PAYE.  The case relates to events prior to the introduction of section 130 of the Finance Act 2008 on 21 July 2008 which gave HMRC a statutory power of set off. So while the case is interesting......

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