National Provincial Building Society
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 March 1996 |
| Date | 11 March 1996 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
VAT Tribunal
The following cases were referred to in the decision:
Amministrazione delle Finanze dello Stato v SpA San Giorgio(Case 199/82) [1983] ECR 3595
C & E Commrs v McMaster Stores (Scotland) LtdVAT[1995] BVC 406
Commissioner of State Revenue v Royal Insurance Australia LtdUNK(1994) 69 CLR 51
Computeach International Ltd VAT(MAN/91/1224) No. 12,115; [1995] BVC 931
Daynes VAT(EDN/93/16) No. 10,988; [1994] BVC 664
Hans Just I/S v Danish Ministry for Fiscal Affairs (Case 68/79) [1980] ECR 501
Lamdec Ltd VAT(LON/90/1018) No 6078; [1991] BVC 721
Rewe-Zentralfinanz eG v Landwirtschaftskammer für das Saarland(Case 33/76) [1976] ECR 1989
Les Fils de Jules Bianco v Directeur Général des Douanes et Droits Indirects (Joined Cases 331, 376 and 378/85) [1988] ECR 1099
Unjust enrichment - Whether the appellant was unjustly enriched by repayment to it of VAT on "deeds production fees" - Value Added Tax Act 1994, s. 80.
The issue was whether a claim for repayment of VAT that the appellant had wrongly charged on deeds production fees, which were fees charged to solicitors on the supply of title deeds, was barred because the appellant would be unjustly enriched by receipt of such payment.
The appellant, like all other building societies, took deposits of money from the public and made loans to the public secured by mortgages. In almost every case the property mortgaged was the borrowers' dwelling house and the mortgage was a first mortgage, by virtue of which the appellant held the borrower's title deeds. If a mortgagor wished to inspect his title deeds, for instance when he wished to sell the mortgaged property, he had the right to inspect and copy them on payment of the mortgagee's (the appellant's) reasonable costs and expenses. For many years the appellant's practice had been to send the deeds to the mortgagor's solicitors and to charge a fee for this service, called a "deeds production fee", which it added to the mortgage debt.
The appellant, in common with other building societies, accounted for VAT on the deeds production fees. Early in 1990 the commissioners ruled that VAT was not chargeable on those fees. Accordingly the appellant ceased to account for VAT on them and applied for a repayment of £393,194 which represented output tax on fees accounted for to the commissioners over 44 accounting periods from 1 January 1979 to 31 December 1989. The commissioners refused to pay the sum claimed, contending that the repayment would unjustly enrich the appellant.
None of the appellant's borrowers who were charged deeds production fees asked for tax invoices for the fees and after the ruling that VAT was not chargeable in respect of such fees the appellant did not reduce the fees but merely ceased to account for VAT in respect of them. The appellant stated that if the appeal was successful it did not propose to pay back the VAT accounted for in respect of the deeds production fees to the relevant borrowers. The appellant considered that it was justly entitled to retain the VAT and since the average sum to be returned was £1.05 per fee paid, and there had been 374,000 fees involved, the cost of inviting, receiving, verifying and satisfying claims would exceed the amount which would be repayable. The appellant therefore proposed, if the appeal succeeded, to place the monies received in its general reserves to be applied from time to time with the rest of its reserves for the benefit of its members.
Held, allowing the appeal:
1. Claims under Value Added Tax Act 1994 section 80s. 80 of the Value Added Tax Act 1994 ought to be considered under that section and not under the general law of restitution in force in England and Wales or Scotland, each of which differs from the other.
2. The burden of proving unjust enrichment lay on the commissioners.
3. There must be a real link between the tax and the price paid to establish that the VAT was passed on to the customer.
4. In fixing its deeds production fees the appellant was concerned only to fix a price which would be acceptable to the market and the supposed impact of VAT merely reduced the amount which it would otherwise have received by the way of fees. The argument by the commissioners, that in order for the appellant to succeed it must be seen that the appellant had suffered loss by keeping the deed production fees lower than it wished because the addition of VAT to the fees would have prejudiced its position on the market, was incorrect. The appellant suffered loss by being compelled, as it thought, to account for VAT on fees which it had fixed without reference to VAT.
5. In the instant case the VAT element of the deed production fees was not "passed on" to the borrowers and the borrowers were not overcharged because the deed production fees were expressed as a single inclusive amount.
[The tribunal set out the facts summarised above and continued as follows.]
The material provisions of Value Added Tax Act 1994 section 80s. 80 [of the Value Added Tax Act 1994], which do not differ in substance from those of s. 24 [of theFinance Act 1989], are as follows:
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80(1) Where a person has (whether before or after the commencement of this Act) paid an amount to the Commissioners by way of VAT which was not VAT due to them, they shall be liable to repay the amount to him.
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80(3) It shall be a defence, in relation to a claim under this section, that repayment of an amount would unjustly enrich the claimant.
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I turn to the cases.
National courts are "entrusted with ensuring the legal protection which citizens derive from the direct effect of the provisions of community law": Rewe-Zentralfinanz eG v Landwirtschaftskammer für das Saarland (Case 33/76) [1976] ECR 1989. In other words, a remedy against unlawful charges must be available: per Sir Gordon Slynn, Advocate-General, in his opinion in Les Fils de Jules Bianco v Directeur Général des Douanes et Droits Indirects(Joined cases 331, 376 and 378/85) [1988] ECR 1099. There being no rules or procedure for this...
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