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

Share this content


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.




Please login or register to join the discussion.

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?

Thanks (0)
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......

Thanks (0)