Bratt Autoservices Company Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Lord Justice McFarlane,Lord Justice Sales |
| Judgment Date | 18 May 2018 |
| Neutral Citation | [2018] EWCA Civ 1106 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/1652 |
| Date | 18 May 2018 |
[2018] EWCA Civ 1106
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
The Hon Mr Justice Warren and Judge Colin Bishopp
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice McFarlane
Lord Justice Floyd
and
Lord Justice Sales
Case No: A3/2016/1652
Mr Andrew Hitchmough QC and Mr Ian Bridge (instructed by Fieldfisher LLP) for the Appellant
Mr Raymond Hill (instructed by The General Counsel and Solicitor to HM Revenue and Customs) for the Respondent
Hearing date: 1 May 2018
What are the requirements for a “claim” for an amount of overpaid VAT for the purposes of section 80 of the Value Added Tax Act 1994 (“the Act”)? That is the issue which arises on this appeal. The appeal is from a decision of the Upper Tribunal, Tax and Chancery Chamber (Warren J and Judge Bishopp, (“the UT”)) released on 19 February 2016 which allowed an appeal by HMRC from the decision of the First-tier Tribunal, Tax Chamber (Judge Berner, (“the FTT”)) released on 10 July 2014. The UT decided that Bratt Auto Services Limited (“the taxpayer”) had not made a claim to recover an amount of overpaid VAT. Permission for the taxpayer to appeal further to this court was granted by Kitchin LJ on the papers on 15 July 2016.
Section 80 of the Act governs the crediting or repayment of output tax accounted for by a taxpayer which is not output tax due. In the version in force on 30 March 2009, which is the relevant date for the purposes of this appeal, it provides as follows:
“(1) Where a person –
(a) has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and
(b) in doing so, has brought into account as output tax an amount that was not output tax due,
the Commissioners shall be liable to credit the person with that amount …
(2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose …
(3) It shall be a defence, in relation to a claim under this section by virtue of subsection (1) … that the crediting of an amount would unjustly enrich the claimant.
(4) The Commissioners shall not be liable on a claim under this section —
(a) to credit an amount to a person under subsection (1) … above … if the claim is made more than 3 years after the relevant date …
(4ZA) the relevant date is —
(a) in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection …
(6) A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases.
(7) Except as provided by this section, the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them.”
The regulations to which section 80(6) refers are the Value Added Tax Regulations 1995 (SI 1995/2518) (“the VAT Regulations”). The relevant regulation (“regulation 37”), provides:
“A claim under section 80 of the Act shall be made in writing to the Commissioners and shall, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.”
The time limit of 3 years after “the end of the prescribed accounting period” specified by section 80(4) and (4ZA) for claims under section 80(1) which had been introduced by the Finance Act 1997 was held to be unlawful (in the absence of a reasonable transitional period) on the ground that it was incompatible with the EU law principles of effectiveness and legitimate expectation: see Fleming (trading as Bodycraft) v Revenue and Customs Commissioners [2008] STC 324. The time limit was extended to 4 years with effect from 1 April 2009 by the Finance Act 2008, which also, by section 121, disapplied the time limit for claims made in respect of accounting periods ended before 4 December 2006 if a claim was made before 1 April 2009. This resulted in many claims before the new deadline, some of them reaching back to the introduction of VAT.
By a letter dated 30 March 2009, and thus two days before the end of the extended period introduced by section 121 of the 2008 Act, solicitors then acting for the taxpayer and an associated company purported to make a claim for the recovery of output tax said to have been incorrectly accounted for. The claims were founded upon two decisions of the Court of Justice of the European Union (as it now is) namely Elida Gibbs Ltd v Customs and Excise Commissioners (Case C-317/94) [1996] STC 1387 (“ Elida Gibbs”) and European Commission v Italian Republic (Case C-45/95) [1997] STC 1062 (“ Italian Republic”). The details of these cases do not matter for the purposes of this appeal.
The taxpayer's March 2009 letter enclosed a copy of the taxpayer's accounts for the year ended 31 December 1989. It then explained, by reference to those accounts for that year, how the solicitors had arrived at a value of £1,293,750 for the taxpayer's claim for repayment of overpaid VAT for that year, based on Elida Gibbs. The letter then went on to explain that it was believed that a claim could be calculated on a similar basis for each of the years when audited accounts were available, extrapolating the claim backwards over the period of trading. The letter did not include such accounts, or any indication of what they would show. The solicitors said that they understood that their client's claim for a refund could extend back to 1973, although, as was later pointed out, 1973 would pre-date the taxpayer's incorporation by some years.
HMRC rejected the purported claim on the grounds that it did not meet the statutory requirements.
The FTT decision
The matter came before the FTT as a preliminary issue. Before the FTT, HMRC argued that the letter of 30 March 2009 did not constitute a claim because it did not refer to “prescribed accounting periods”. Judge Berner rejected this as a requirement for a claim: see paragraph [28]. Section 80(6) and regulation 37, in his judgment, defined exhaustively what was required for a claim, and those provisions did not leave room for any implied further requirement for the making of a claim. There was therefore no requirement that it be made by reference to prescribed accounting periods. Judge Berner also rejected an argument that the claim must contain enough for HMRC in due course to determine the claim: the requirements of a claim and the material necessary to determine it were not the same thing.
Judge Berner therefore allowed the taxpayer's appeal in relation to the calendar year 1989 and all previous years back to 1973. The failure to state an amount for these previous years was a matter which could be dealt with by amendment to the claim: see paragraph [38].
The UT decision
In allowing HMRC's appeal, the UT agreed (see [40]) that there was nothing in regulation 37 to support the view that a claim which relates to several accounting periods must be allocated to them individually. However the UT considered that the requirement for allocation to individual prescribed periods came from section 80 itself. At [41] the UT decided as follows:
“It is clear that sub-s (1) is directed at an amount for which the taxpayer has accounted as output tax but which was not output tax due for a single prescribed accounting period. It is impossible to read the subsection in any other way. Subsection (2) then provides for a claim for repayment of “an amount under this section”; we agree with [counsel for HMRC] that the “amount” referred to here must be the same “amount” as is mentioned in sub-s (1). Thus … the taxpayer must comply with sub-s 80(6) and reg 37 in respect of each period.” (emphasis supplied)
The UT went on to express the view that it would be sufficient to say, if it be the case, that the same method of calculation applies to each prescribed accounting period. There would also, in the UT's view, be no objection to a claim which arrived at a figure for a whole year and then apportioned it equally to the accounting periods within that year: see [41].
The UT accepted HMRC's argument that there was good reason for requiring a “claim” to be linked to prescribed accounting periods. This was in part because it would allow the calculation of interest, but also because it would allow HMRC to determine whether the time limit for making the claim had expired. As the time limit had to be calculated as a period from the end of the relevant accounting period, the UT “did not see how that can be possible if it is permissible to make a claim without allocating it to separate accounting periods”: see [42]. Having rejected the claim for the calendar year 1989, it followed that the claims for the earlier years could do no better (see [43]), and the UT accordingly allowed the appeal.
The appeal
The taxpayer no longer complains about the rejection of its purported claim for years earlier than 1989. Insofar as the purported claim made by the letter date 30 March 2009 related to 1989, however, Mr Hitchmough QC, who appeared with Mr Ian Bridge for the taxpayer, submitted that the formal requirements of regulation 37 were complied with because the letter identified an amount and a method of calculation for the calendar year. Moreover the letter was clearly a claim by the taxpayer that it had accounted to HMRC for VAT and had brought into account an amount that was not output tax due. Repayment should not therefore be denied simply on the basis, he submitted, that the claim had not been allocated on a...
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