Value added tax

The purpose of s 36 of the Value Added Tax Act 1994 was to permit the refunding of VAT in respect of bad debts, to ensure that the taxpayer who collected the VAT on behalf of the revenue was not left out of pocket by a failure to obtain payment from his customer. That purpose required that the whole of the VAT that had not been recovered from the customer should be refunded; otherwise the taxpayer was out of pocket. Section 36, reading the first three subsections together, permitted a refund of the amount of VAT chargeable by reference to an amount equal to the amount of the consideration so written off. The amount written off was, demonstrably, all VAT. The compound preposition “by reference to” indicated that, in determining the amount of the refund, reference had to be had to the consideration that was written off. If that amount was only VAT, that fact had to be taken into account in determining how reference was to be made