Cambria Automobiles (South East) Ltd and Another v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 October 2023 |
| Neutral Citation | [2023] UKUT 249 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
Judge Phyllis Ramshaw, Judge Kevin Poole
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Italian Republic claims for overpaid VAT on sales of demonstrators between 1973 and 1996 – Claims made in 2003 on basis of original Italian tables – Settled under VATA 1994, s. 85 - Subsequent additional overpayment claims in 2009 when HMRC acknowledged errors in original Italian tables – Whether 2009 claims subject to s.85 agreement – Yes – Appeal dismissed
In Cambria Automobiles (South East) Ltd & Anor v R & C Commrs, the Upper Tribunal set aside and remade the decision of the FTT in Cambria Automobiles (South East) Ltd but reached the same conclusion, that a VATA 1994, s. 85 agreement settled all Italian Republic claims and precluded the appellants from making any further valid claims in respect of the periods covered by it so that their attempt to do so was invalid and their appeal an abuse of process.
Between 1973 and 1996, the appellants had sold ex demonstrator vehicles and accounted for output tax on the margin. In 2003, following the decision in Commission of the European Communities v Italian Republic when it was confirmed such sales should be exempt from VAT, overpayment claims were submitted. HMRC initially rejected the claims and appeals were made. Those appeals were the subject of an agreement under VATA 1994, s. 85 (the s. 85 agreement) which set a final agreed amount for the claims with the same consequences as if a Tribunal had determined the appeal. It was subsequently acknowledged, however, that the Italian tables, on which the 2003 claims were based, contained errors. As a result of the errors, the claims were understated. New claims were submitted in 2009 to recover the shortfall in the original claims. HMRC rejected the 2009 claims and, on appeal, the FTT decided the 2009 claims were precluded by the s. 85 agreements, amounted to an abuse of process and should be struck out.
The UT found there were errors of law in the FTT decision and decided to set it aside and remake it.
The appellants argued the s. 85 agreement should be regarded as permitting further claims which had ‘something new to say’. The key question therefore was whether the phrase ‘the Appellants claim for overpaid VAT’ in the s. 85 agreement should be interpreted as meaning the agreement only extended to the claim at that time, or whether it extended to cover any overpayment that had arisen in respect of the relevant supplies in the relevant period. If the VAT Tribunal had determined the original appeals would that have amounted to a comprehensive and final determination of the overpaid amounts, or would it have left open the possibility of further claims?
The UT considered the natural and ordinary meaning of the phrase deciding that it referred to the wider concept of claim. Relief was being sought for all the overpayments made in respect of demonstrator vehicle sales. The method of arriving at the amounts of those overpayments changed over the period of negotiation but the core objective remained the same.
It was also noted the legislation set out a statutory basis for the settlement of appeals and it was unlikely this was intended to allow an appellant to simply ignore the agreement if it subsequently transpired a more favourable settlement might have been reached.
Finally, if there had been no settlement and the 2003 claim had been determined by the Tribunal, the quantum of the claims would have been determined by the Tribunal, probably using the Italian tables. Any later attempt to reopen the matter on the basis of subsequent evidence showing better approximations than the Tribunal had used would inevitably have been met by the argument the matter was res judicata.
The UT therefore concluded a reasonable person having all the background knowledge available to the parties at the time of signing the s. 85 agreement would have understood it to extend to all overpayments pursuant to the Italian Republic case in relation to vehicles supplied by the appellants during the relevant periods. The appeal must therefore be dismissed as an abuse of process.
The appellants were seeking to rely on Hayward Gill & Associates Ltd. as authority for submitting a further claim based on new information but, unlike the current situation, there had been no adjudication in that case, and no negotiations resulting in a legally binding agreement.
Comment by Angela Bedi, Senior Tax Writer, Croner-i Ltd.
Peter Mantle, Counsel, instructed by DMC Partnership Limited appeared for the appellant
James Puzey, Counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
[1] Claims were made to HM Customs & Excise in June 2003 (“the 2003 claims”) in respect of the Appellants (respectively “Cambria” and “Invicta”, and together “the Companies”) to recover historical overpaid VAT arising out of the ECJ Italian Republic case (see [5.] below) in respect of demonstrator vehicles. The 2003 claims were rejected and appeals against that rejection were notified to the VAT Tribunal. Before the appeals were heard, and after various adjustments were made following lengthy negotiations, the 2003 claims were settled in March 2006 by agreement between the parties under section 85 Value Added Tax Act 1994 (“VATA”) (“the section 85 Agreement”).
[2] Subsequently the quantum of the 2003 claims was considered to have been understated, because of errors in the tables originally published by HM Customs & Excise which showed the basis upon which they were prepared to accept Italian Republic claims. These tables had formed the basis of the 2003 claims. New claims were then submitted by the Companies to HMRC1 in March 2009 (“the 2009 claims”), seeking to recover the shortfall in the original 2003 claims.
[3] HMRC ultimately rejected the 2009 claims. Appeals against this rejection were notified to the First-tier Tribunal (the “FTT”) in 2009 and 2010 but the appeals were stayed for other reasons. Ultimately the stays were lifted and the appeals were heard by the FTT. In a decision dated 9 November 2021 (“the Decision”), the FTT (Judge Popplewell) decided (in summary) that the 2009 claims were precluded from being brought by virtue of the section 85 Agreement, they amounted to an abuse of the process of the FTT and therefore ought to be struck out as having no reasonable prospects of success.
[4] Cambria and Invicta appeal against that decision.
[5] The FTT made extensive and detailed findings of fact, but for present purposes the brief summary of the facts and the dispute between the parties set out at paragraphs [1] to [5] of the Decision gives a sufficient outline:
[1] This case concerns VAT and, in particular, whether HMRC's decision to reject claims made by the appellants in 2009 for overpaid VAT on the sale of demonstrator motor vehicles sold by the appellants between 1973 and 1996, is correct.
[2] During the course of the appellants' business between 1973 and 1996, they sold ex demonstrator vehicles and accounted for VAT on the profit margin of those vehicles sold at a profit, in line with HMRC's interpretation of the law at that time. As a result of the European Court of Justice decision in Commission v Italian Republic C-45/96 HMRC (or as they were then, HM Customs & Excise (“Customs”)) accepted that the sales of ex demonstrator motor vehicles were exempt from VAT and consequently motor dealers could seek to reclaim overpaid output tax pursuant to section 80 VAT Act 1994 (“Section 80”).
[3] On 26 June 2003 the appellants brought overpayment claims under section 80 (the “2003 claims”). Customs decided to reject these claims and the appellants appealed against that decision. Those appeals were the subject of an agreement under section 85 VAT Act 1994 (the “Section 85 agreement”) which was entered into at the end of March 2006.
[4] On 25 March 2009 the appellants brought further overpayment claims under section 80 (the “2009 claims”). HMRC decided to reject those claims and the appellants appealed against that decision. It is these appeals which I have to decide.
[5] The issues in a nutshell are these. The appellants say that on the authority of the Court of Appeal decision in John Wilkins[2010] BVC 948 (“John Wilkins”) that it is possible to bring second or successive overpayment claims under section 80 provided that those claims have something new to say. The 2009 claims do have something new to say when compared to the 2003 claims. The 2009 claims were not covered by the section 85 agreement which only covered the 2003 claims, nor are they abusive when tested against the principles set out in the House of Lords decision in Johnson v Gore Wood [2002] 2 AC 1 (“Gore Wood”). HMRC's view is that even if John Wilkins is authority for the foregoing proposition, the 2009 claims do not have anything new to say. Furthermore, the 2009 claims which are based solely on a different method of calculating the overpayment, are covered by the section 85 agreement and any overpayment claims for the same period and for the sale of the same cars cannot now be reopened. Furthermore, the 2009 claims are abusive when tested against the Gore Wood principles.
[6] The full text of the section 85 Agreement referred to at [3] in the Decision is set out as an appendix to this decision.
[7] The basis of calculation of both the 2003 claims and the 2009 claims requires a little more explanation. Following the ECJ decision in Italian Republic, HMRC (recognising that few traders were likely to have kept records back to 1973 to enable them to calculate claims accurately) consulted with trade bodies and ultimately published tables, divided into three categories of vehicle (“prestige”, “volume” and “other”) accompanied by notes explaining the basis on which claims for the marques held by the...
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