Leicester City Council
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 March 2021 |
| Neutral Citation | [2021] UKFTT 75 (TC) |
| Date | 18 March 2021 |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 75 (TC)
Judge Guy Brannan
Leslie Allen, Mishcon de Reya, appeared for the appellant
Laura Castle, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the Respondents
Value added tax – Claim for repayment of overpaid VAT – VATA 1994, s. 80(4) – Claim submitted outside 4 year time limit – Whether an amendment to an existing claim and therefore within time limit – No – Appeal dismissed.
The First-tier Tribunal dismissed an appeal, against HMRC's refusal to repay certain amounts claimed by the appellant outside of the usual four year time limit, and did not accept they were amendments to an existing claim and not, therefore, out of time.
The Council had submitted a Fleming claim and several subsequent claims in respect of over-declared output tax on sports and leisure facilities. Claims in respect of periods 04/73 to 12/89 were rejected on 10 September 2012 and are stayed behind an appeal by Chelmsford City Council (Chelmsford City Council [2020] TC 07909). Following the decision of the ECJ in London Borough of Ealing v Revenue and Customs Commissioners (Case C-633/15) [2017] BVC 35, HMRC accepted the Council's position, in respect of claims made from 01/90 to 11/96, that the supply by the council of sports facilities was exempt from VAT and many of the repayment claims previously rejected were paid in May 2019.
The final two claims (the April 2018 claims), also referred to as Claim 7 and Claim 8, in respect of golf course income and income from sport on parks, were rejected by HMRC as being brought outside the four-year limit imposed by VATA 1994, s. 80. The council maintained they were amendments to earlier claims and not, therefore, out of time.
It was clear from correspondence that Claims 2, 3 and 5 were made in respect of the provision of sports and leisure services or simply sports services but they did not include any golf course income or sport on parks income, although a separate Claim 4 had been submitted which included golf course income from 04/13 to 03/16 inclusive. The question was, therefore, whether Claims 7 and 8 were amendments to the earlier claims 2, 3 and 5 which mistakenly omitted this income, or if they were new claims. It was common ground the income was not liable to VAT.
The question of whether a subsequent claim was a new claim, or an amendment of an existing claim, had been examined, previously, by both the FTT and Upper Tribunal (UT). The leading authority was Reed Employment Ltd v R & C Commrs [2013] BVC 1,593 where the UT held a further demand was an amendment to an existing claim only if it arose out of the same subject matter as the original claim, without any extension to the facts or circumstances of the earlier claim, so that it did not extend the scope of the earlier claim.
The FTT accepted from witness evidence, when Claims 2,3 and 5 were submitted, the intention of the Council had been to claim in respect of income from all its sport and activities. It was only on review they realised the income from golf courses and sport on parks had been mistakenly omitted. But they found the subjective intention of the appellant did not determine the issue. What had to be considered was whether it was objectively contemplated, when claims 2, 3 and 5 were made, that further claims in respect of golf courses and sport on parks income were within the scope of what had been claimed?
In Reed, the new claim covered supplies that had been consciously excluded from the original claim. In this case the earlier claims were made in broad terms, wide enough to include the underlying supplies in all the earlier and subsequent claims, but they did not include the actual supplies that formed the later claims. The FTT found there was a material difference in the original supplies which did not include supplies in relation to golf courses or sport on parks. Therefore claims 7 and 8 represented an extension of the facts upon which the earlier claims were based. They were separate claims and not amendments to the existing ones. Appeal dismissed.
From the excerpts of correspondence between the appellant and HMRC referenced in this decision, it is not difficult to imagine the scale of the task faced by Council employees having to consider, and evidence, their position in relation to both the Chelmsford City Council case and the Ealing case at or around the same time. It is also therefore easy to understand how an income stream or category of income could have been missed in the preparation of the earlier claims. In the absence of any objective evidence to the contrary, however, the FTT had to draw the conclusion that it did. In other words, that golf course income and sport on parks income was not originally contemplated as being within the earlier claims, as unlikely as that may have been. It highlights, once again, the importance of documentation and maintaining a written record of the scope, as well as the detail, of any contemplated or agreed actions when dealing with HMRC.
[1] This appeal concerns HMRC's decisions on 10 September 2018 and 11 September 2018 by which HMRC refused to repay certain amounts contained in the Appellant's claims made to HMRC on 25 April 2018 and 26 April 2018 (collectively “the April 2018 claims”). The Appellant (“the Council”) appeals against those decisions and it is common ground that these are appealable matters under section 83(1)(t) of the Value Added Tax Act 1994 (“VATA”).
[2] In short, the Council contends that the April 2018 claims constituted amendments to existing claims that had already been made within the four year time limit prescribed by section 80(4) VATA. HMRC, on the other hand, argue that those claims constituted new claims made outside the four year time limit.
[3] I was supplied with an electronic bundle of documents comprising 422 pages. That bundle contained a witness statement of Mr Ian Harris, a Principal Accountant with the Council, who was responsible for the Council's VAT affairs at all material times.
[4] In the course of the hearing, Ms Castle (appearing for HMRC) indicated that she wished to cross-examine Mr Harris. The Council's skeleton argument had clearly proceeded on the basis that Mr Harris' evidence would be unchallenged. Mr Allen (appearing for the Council) informed me that HMRC had previously indicated that they did not intend to cross-examine Mr Harris. After the hearing, Mr Allen produced email correspondence (particularly an email dated 28 May 2020 from HMRC) which supported his understanding.
[5] Nonetheless, although unprepared, Mr Harris indicated that he was willing to answer questions and I permitted Ms Castle to cross-examine him. In the event, I do not think that cross-examination advanced matters appreciably. Mr Harris was in my view an honest and credible witness. HMRC did not seek to give witness evidence of its own.
[6] I do not think it is satisfactory, however, that a witness should be taken by surprise in this manner. If HMRC had intended to cross-examine Mr Harris then this should have been made clear in advance of the hearing. That, in the circumstances of this case, I permitted the cross-examination to proceed should not be taken as a general permission to cross-examine a witness without warning in this way.
[7] It may be helpful at the outset if I briefly outline the circumstances leading to this appeal. There have been many repayment claims made by the Council and it is easy to experience some difficulty in seeing the “wood for the trees” without some sort of overview. I also refer to paragraphs 49 to 51 below, where I attempt to summarise the position in relation to the April 2018 claims (which are referred to below as “Claim 7” and “Claim 8”).
[8] I should also make it clear at this stage that when I refer to a “claim” I do so merely for convenience without in any way prejudging the issue that I have to decide, viz whether the claim is an amendment to an existing claim or a new claim.
[9] As I shall explain in more detail, the Council (along with a number of other similar councils) came to the view that it may have overpaid VAT in respect of the provision of sports facilities.
[10] The Council submitted what is known as a “Fleming claim”1 to HMRC on 25 March 2009 in respect of over-declared output tax on sports and leisure facilities from 1973 to 1996. Further claims in respect of later periods were submitted and, as time went by, further repayment claims covering later periods were submitted within the four year time limit prescribed by section 80(4).
[11] Ultimately, following the decision of the ECJ in London Borough of Ealing v R & C Commrs (Case C-633/15) [2017] BVC 35 (July 2017) (the “Ealing case”), HMRC accepted the Council's position that the supply by a council of sports facilities was exempt from VAT under what is now article 132(1)(m) of the Principal VAT Directive.
[12] The result of the Ealing case was that many of the repayment claims made by the Council, which had initially been rejected on the basis that there was no underlying liability, were accepted and were paid by HMRC in May 2019.
[13] However, in March 2017 the Council claimed a further repayment of output tax in respect of its income from golf courses. In April 2018 the Council put in further claims, amending the March 2017 claim, in respect of its golf course income. In addition, the Council also claimed a repayment of output tax in respect of its income from sports activities on its parks (“sport on parks”). These final two claims are the April 2018 claims.
[14] HMRC have rejected the Council's April 2018 claims in respect of its golf course income and from sport on parks. HMRC say that these are new claims, brought outside the four year limit imposed by section 80(4), and are not amendments to existing claims. The Council maintains that the April 2018 claims were...
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