This was an appeal against HMRC’s decision that the appellant’s supplies were exempt from VAT on the basis that they were supplies of ‘welfare services’ to children because those services were directly connected with the care or protection of children. 
 
This was an unusual case in that if HMRC were successful then the appellant would be deemed to have made exempt supplies and, consequently, it would have over-declared output tax to HMRC. After deducting over-claimed input tax, the appellant’s net position was that it would be due a net repayment of £400,490.97 from HMRC. However, under the unjust enrichment provisions, the output tax would have to be repaid to clients and, in effect, the appellant would be worse off to the tune of the input tax disallowed. 
 
The appellant was a charity and in 2004, following correspondence, HMRC confirmed that, because the appellant