DCM (Optical Holdings) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 March 2017 |
| Neutral Citation | [2017] UKFTT 0785 (TC) |
| Date | 23 March 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
[2017] UKFTT 0785 (TC)
Judge Anne Scott, Member: Eileen Sumpter
Mr Roderick Cordara, QC and Mr Andrew Legg of counsel, appeared for the appellant
Mr Martin Richardson of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Granted – Partial strike out applications – Granted – Leave to lodge a late appeal – Refused – VAT Information Sheet 08/99 – Separately Disclosed Charges – Attribution of discounts – VATA 1994, s. 19(4) – Unadjudicated claim – Time bar – Assessment – Evidence of facts – Appeals dismissed.
[1] The respondents have previously been known as HM Customs and Excise and are referred to throughout herein as “HMRC”.
[2] The appellant (“DCM”) consists of 151 stores in four countries. It is principally an optical business, specialising in the sale of dispensed spectacles and the provision of refractive eye surgery.
[3] DCM (formerly known as David Moulsdale Holdings Limited until 7 November 2001) is registered in a Value Added Tax (“VAT”) group with ten corporate bodies accounting for VAT under a single registration number. DCM acts as the representative member.
[4] DCM is a partially exempt business for VAT purposes. The taxable income relates to the supply of frames, lenses, accessories, EC despatches of laser equipment, cosmetic dental kits and Careplan. The exempt supply is that of dispensing services, eye tests and laser surgery. As a result of making both taxable and exempt supplies, any input tax incurred by DCM is recovered by reference to a partial exemption method.
[5] Fortunately there was no dispute about the basic VAT principles and we do not require to rehearse the statutory provisions at length in this decision. It is settled law12that an optician makes two distinct supplies. Of course the customer pays for both at the same time so section 19(4) Value Added Tax Act 1994 (“VATA”) comes into play. That requires VAT to be properly attributed (or apportioned to each supply).
[6] HMRC's VAT Information Sheet 08/99 (“08/09”) consolidates guidance on the “Apportionment of charges for supplies of spectacles and dispensing by opticians”. 08/99 sets out the two methods of apportionment open to opticians, namely Full Cost Apportionment (“FCA”) and Separately Disclosed Charges (“SDC”). If the requirements for SDC are not met then FCA is the only other alternative. We annex at Appendix 1, Annex B from 08/99 which describes SDC and sets out what HMRC view as their relaxation of the strict statutory position. It is not legally binding but Mr Richardson agreed that it does bind HMRC.
[8] This hearing is in respect of six appeals, all arising from output tax related issues connected to the operation by DCM of its chain of opticians' stores throughout the UK. The input tax related issues have been the subject of past appeals and are now settled. There was one previous output tax appeal which settled.
[9] These appeals have a long history and have been subject to extensive case management.
[10] The six appeals were not consolidated but were heard together as there are a number of common themes in the appeals. The issue for the Tribunal was to make decisions in principle and not to address the precise quantum.
[11] On 15 August 2016, HMRC had lodged three strike-out applications in respect of portions of Appeals 3, 4 and 5. Those were opposed by DCM. By agreement, at the outset of the hearing, it was agreed that those applications be considered in the course of the hearing once evidence had been heard. On the fourth day of the hearing, it was agreed that the only extant strike out application that was opposed was that for Appeal 4. On hearing HMRC's argument on that application, Mr Legg sought leave to lodge an application for admission of a late appeal.
[12] We granted HMRC's applications and refused that for DCM. Our reasons for those decisions are to be found at the Footnote to this Decision.
[13] At 5.30pm on Friday 23 September 2016, DCM had produced to HMRC copies of what were described as 12 additional “receipts”, two of which carried no corporate logo and were dated August and September 2003 and the remaining ten of which carried the “Optical Express” logo and covered dates between 10 October 2003 and 17 December 2004. They were in a different format to the specimen “receipts” in the previously produced bundle. There was no reference to them in any witness statement or skeleton argument.
[14] In paragraph 6 of the skeleton argument for Appeal 1 HMRC had stated: “It is also notable that the Appellant has not produced any evidence of the actual sales documentation from prior to this date (01/02/04) which properly disclosed separate charges to customers”. HMRC opposed their introduction and relied on rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”) and referred to Allen3.
[15] It was argued that the “receipts” were of “dubious provenance” and therefore of limited probative value, that there was prejudice to HMRC in terms of time and costs in having to investigate such “receipts” at such a late date and that the receipts should not be admitted. In the event that the “receipts” were to be admitted in evidence, whether on a reserved basis or not, HMRC sought a discharge of two of the dates set down for this hearing to enable them to instigate investigations. It was argued that they were entirely new evidence after a decade of litigation.
[16] For DCM it was argued that these were contemporaneous “receipts” and therefore both interesting and helpful. They had been found in the Cumbernauld store and, if required, a witness could be called to speak to their origin.
[17] We reserved our decision on whether or not the “receipts” should be admitted, pointing out that perhaps any application for their admission should be restructured with an explanation as to their provenance and also production of the originals. Since they covered a large period, an explanation as to why those particular “receipts” had been chosen might be appropriate.
[18] We were not prepared to consider discharging two days of the hearing.
[19] On day four of the hearing, of consent, DCM sought leave to lodge a second witness statement of Mr Murdoch speaking to the provenance of the “receipts” and it, and they, were admitted into process.
[20] In fact, although in the first paragraph of his said witness statement he referred to them as receipts, since that is how they were referred to in argument, he correctly identified some of them thereafter as “sales order confirmation forms” which, we understand, were given to customers with their receipts. The customers signed these, hence their retention. We have produced two at Appendix 2 which we have anonomised by removal of the signatures. We refer to all receipts and sales order confirmation forms hereafter as receipts.
[21] HMRC sought leave to lodge copies of the VAT Returns for the periods 10/02 to 07/05 and 01/06 to 12/07 in paper form and evidence of electronic submission for period 03/08 to 12/08. DCM did not oppose that application and they were admitted of consent. On day three, DCM sought leave to lodge an analysis of those VAT Returns. It was factually accurate (other than in the numbering of the rows) and was admitted.
[22] DCM sought leave to lodge what was described as a “clip” of documents all bar one of which were derived from Bundle 1. The first seven pages were a copy of documents 499.5 to 499.13 but some entries had been highlighted and an unknown hand had handwritten various figures thereon. In the event those handwritten figures were never explained and were ignored by the Tribunal. The final page was a table referencing some of the highlighted entries to the various VAT Returns. The “clip” was admitted in evidence of consent.
[23] HMRC sought to lodge an extract from HMRC's archives which covered a longer period than the documents already in evidence. That was opposed and the application was withdrawn.
[24] The parties agreed that no expenses should be sought or awarded in any of the appeals.
[25] At the end of closing submissions, Mr Cordara sought leave to lodge this analysis. After debate, since Mr Richardson had had no previous notice, it was decided that the papers in question would be lodged with the Tribunal, sight unseen, and the parties would later jointly intimate whether or not it should be admitted. Nothing further transpired and we are dealing with points of principle only so it has been disregarded.
[26] In Closing, Mr Cordara handed up “Appellant's Note in response on SDC” and spoke to it. Mr Richardson did not object and responded verbally.
[27] After the conclusion of the Hearing, DCM lodged by email with the Tribunal and HMRC, a written summary entitled “Appellant's Note of DCM's Key Unchallenged Evidence”. No objection was taken.
[28] Two Joint Bundles of Authorities were lodged together with a further three Authorities from the appellant and one from HMRC. We annex at Appendix 3 the composite List thereof. In fact, very few of the Authorities were referred to in the course of the Hearing and those that were are highlighted in bold.
[29] At paragraph 12 of DCM's skeleton argument it was stated that “the main source of evidence in the case will be documentary”. We had an extensive bundle of documents in addition to a bundle of the formal documentation such as Notices of Appeal, Statements of Case, etc.
[30] We heard...
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