British Teleflower Service Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 29 November 1995 |
| Date | 29 November 1995 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Animal Virus Research Institute VAT(LON/87/428) No. 2692; (1988) 3 BVC 713
Barar t/a Turret House Rest Home VAT(LON/93/2224 and LON/93/2021) No. 12,707; [1995] BVC 1249
Bardsley t/a Bardsley Car Sales VAT(MAN/84/62) No. 1718; (1984) 2 BVC 205,107
Brookes VAT(LON/92/2756) No. 11,752; [1995] BVC 681
C & E Commrs v JH Corbitt (Numismatists) Ltd VAT(1980) 1 BVC 330
C & E Commrs v The Post Office VAT[1995] BVC 292
Cando 70 (1978) VATTR 211
Duffy & Carr Group plc VAT(LON/93/1525) No. 11,728; [1995] BVC 1395
Farm Facilities (Fork Lift) Ltd VAT(LON/86/655) No. 2366; (1987) 3 BVC 567
GUS Merchandise Corporation Ltd (1978) VATTR 28
John Dee Ltd v C & E Commrs VAT[1995] BVC 361
MJ Gleeson Group plc VAT(LON/94/1868) No. 13,332; [1996] BVC 4119
Purdue VAT(EDN/94/511) No. 13,430; [1996] BVC 4138
Shepherd VAT(LON/93/1197) No. 11,753; [1995] BVC 690
The Post Office VAT(MAN/93/639) No. 12,335; [1995] BVC 1064
United Biscuits (UK) Ltd (t/a Simmers) v C & E CommrsVAT[1992] BVC 54
Tribunals - Jurisdiction of tribunal - Extra-statutory concession - Decision dependent upon prior unappealable decision - Self-billing - Refusal by commissioners to permit input tax deduction where supplies made by unregistered traders - Whether tribunal entitled to review exercise of commissioners' discretion in not applying concessions - Whether ESC A5 and A6 applicable - Value Added Tax Act 1983, s. 40(1)(c), (m) and (6) (Value Added Tax Act 1994, Value Added Tax Act 1994 section 83 section 83 section 84 subsec-or-para (10)s. 83(c), (p) and 84(10)). Assessment - Commissioners' discretion to assess - Whether exercised reasonably where appellant's standard of compliance high - Time-limit for assessment - Whether assessment made within one year after evidence of facts came to commissioners' knowledge - Value Added Tax Act 1983, Sch. 7, para. 4(5)(b) (Value Added Tax Act 1994, Value Added Tax Act 1994 section 73 subsec-or-para (6)s. 73(6)(b)).
The principal issue was whether the tribunal had jurisdiction to consider the application by the commissioners of extra-statutory concessions and, if so, whether on the facts ESC A5, "the Sheldon Statement" on misdirection (see now ESC 11 of Notice 748 (1995 edn)), and ESC A6, VAT charged by unregistered persons, applied. The tribunal also considered whether: (1) the appellant was entitled to reclaim input tax under a self-billing arrangement where the supplier later proved to be an unregistered trader; (2) the tribunal had the power to consider the exercise by the commissioners of a discretion under their general powers of care and management of tax; and (3) the assessment was made within the statutory time-limits.
The appellant operated a "teleflower" service, whereby flowers were delivered by a member florist carrying on business in the area of a recipient, having been chosen and paid for at a florist in a different area. The latter was entitled to receive 20 per cent of the value of the order while the delivering florist was entitled to receive the remaining 80 per cent. The appellant acted as a clearing house, carrying out a monthly reconciliation and issuing a monthly statement of account to a member.
In 1978, the appellant computerised its clearing-house arrangements which were then formally approved by Customs. Approval was also sought and granted to operate a self-billing system for VAT purposes, a condition of which was that self-billed documents purporting to be tax invoices were not to be issued on behalf of unregistered suppliers. This condition was enforced by the appellant by rules which it published and circulated to members and an application form which, inter alia, requested an applicant's registration number. The information was updated through visits by the appellant's personnel to individual members. The appellant was also able to check the validity of a registration number by means of a computer programme, although this did not show whether a member had maintained his registration.
Between December 1978 and March 1994, officers carried out 27 control visits to the appellant, of which 14 were made specifically to verify the operation of the self-billing scheme, which proved to be satisfactory. In 1989 a manual verification exercise through members' local VAT offices was carried out and this also showed that the appellant was correctly operating the self-billing system. However, in October 1993 the appellant, at Customs' request, submitted a computer tape with data and this showed that 46 suppliers had cancelled their registrations on account of their turnover falling below the registration limits.
On 11 April 1994, Customs raised a "best judgment" assessment on the basis that input tax had been reclaimed under the self-billing arrangement in relation to supplies by members who in fact were not VAT-registered. Following notification of the assessment the appellant requested the commissioners to apply ESC A5 (misdirection) and ESC A6 (reclaims of input tax charged by unregistered persons) but Customs declined to do so.
The appellant contended that under s. 40(6) of the Value Added Tax Act 1983 there was a right of appeal against a decision which depended on a prior unappealable decision and that this applied in circumstances where the commissioners had refused to exercise a concession. On the facts, both concessions were applicable and in view of the company's high level of compliance with the conditions of operation of the self-billing arrangements and the fact that it would have been impossible to operate a fool-proof system Customs had acted unreasonably in refusing to exercise the concessions in their favour. They further contended that on similar grounds the commissioners should have exercised the general discretion which they possessed not to assess the appellant and that, in any event, the assessment was out of time, since Customs had known about the system since 1978, following which nothing had altered.
The commissioners contended that s. 40(6) of the Value Added Tax Act 1983 applied only where they had a statutory discretion and the meaning of "prior decision" was a prior ruling and not merely a decision to take a decision. If the tribunal had such a jurisdiction it was supervisory. Neither concession was applicable to the facts and, if it was, the commissioners had acted reasonably. If the tribunal was entitled to consider whether the commissioners had exercised their general powers under the Act reasonably the correct conclusion was that the appellant had failed to adequately monitor its members' registration status, so that Customs had acted reasonably in issuing the assessment. On the time-limit issue, they contended that not until 10 March 1994 was sufficient information as to the amount of input tax recovered in respect of self -billed invoices available. The assessment was issued on 11 April 1994 which was within the one-year time-limit.
Held, dismissing the company's appeal:
1. Although the point had not been argued, reg. 12(3) of the Value Added Tax (General) Regulations 1985 (SI 1985/886) permitting a self-billed document to be treated as a tax invoice with the commissioners' approval only applied where a supply had been made by another taxable person registered in the UK and therefore did not apply in the instant circumstances.
2. The wording of s. 40(6) of the Value Added Tax Act 1983 made no distinction between prior decisions related to statutory discretions and those related to published non-statutory discretions. The subsection was framed in very wide terms and empowered a tribunal to look at a prior decision involving the exercise of a published non-statutory discretion. The present appeal was against an assessment which depended on a decision not to apply the concessions and this was a decision which did not carry a right of appeal. Therefore s. 40(6) of the Value Added Tax Act 1983 was applicable to the circumstances.
3. The assessment had been raised on the basis of an unequivocal statement that self-billed invoices should not be issued on behalf of unregistered suppliers and this accorded with the statutory provisions. It could not be said that in approving the scheme, with full knowledge that there was no mechanism for continuous checks, Customs had misled the appellant to its detriment. If the appellant had been unable to operate the system within the required conditions it could have chosen not to operate it at all. Where input tax had been claimed in error a compensating adjustment should have been made in the next account to the supplier. Even if the terms of concession A5 applied Customs had not acted unreasonably in refusing to apply it in circumstances where it was a fundamental term of the agreement that the self-billing procedure would not be applied to non-registered suppliers.
4. The terms of ESC A6 did not apply, since this related to an amount shown as VAT on an invoice issued by unregistered person, whereas in the instant case self-billing documents were in issue. Again, even if the concession applied Customs had not acted unreasonably in refusing to apply it.
5. The tribunal did not have jurisdiction to review the exercise by Customs of the power to assess under para. 4 of Sch. 7 to the Value Added Tax Act 1983 or under their general powers of care and management unless there was a prior decision under s. 40(6) of the Value Added Tax Act 1983 such as that not to apply a concession. The tribunal's power was supervisory only, and the tribunal could not substitute its own discretion for that of Customs.
6. The tribunal opined that since Customs were unable to detect problems with members' registration despite their numerous checks it was probably not possible for the appellant to do so either. Although Customs had not acted unreasonably, the appellant had acted honestly and reasonably and had not benefited...
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