NHS Greater Glasgow and Clyde Health Board v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 January 2017 |
| Neutral Citation | [2017] UKUT 19 (TCC) |
| Date | 13 January 2017 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2017] UKUT 0019 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
The Honourable Lord Doherty, (Sitting as a Judge of the Upper Tribunal)
David Southern QC appeared for the appellant, instructed by Liaison Financial Services Limited
Sean Smith QC appeared for the respondents, instructed by the Office of the Advocate General for Scotland
Value added tax – Input tax – Fleming (t/a Bodycraft) v R & C Commrs; Conde Nast Publications Ltd v R & C Commrs [2008] BVC 221 claim for recovery of input tax – Substantiation and quantification of claim – Whether the First-tier Tribunal erred in law in refusing appeal, because evidence insufficient – Value Added Tax Act 1994 (VATA 1994), s. 80 – Value Added Tax Regulations 1995 (SI 1995/2518), reg. 37 – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 35 – Board's appeal refused.
The Upper Tribunal (UT) dismissed the Board's appeal against the decision of the First-tier Tribunal (FTT) ([2015] TC 04324) to uphold HMRC's rejection of a late claim for repayment of VAT concerning dining room expenditure, residual revenue expenditure and capital expenditure. The UT held, as a matter of law, that the FTT was entitled to have reached its decision. The FTT's decision contained adequate findings in fact and reasons.
In addition to its non-business activities, the Appellant Board (“the Board”) had business activities that were within the scope of VAT, such as catering. On 30 March 2009, the Board belatedly reclaimed VAT attributable to taxable business activities during the 20 years from 1974 to 1994 as regards dining room expenditure, residual revenue expenditure and capital expenditure. The repayment claim was rejected by HMRC. The Board appealed against that rejection.
The burden of proof fell on the Board. The standard of proof was the balance of probabilities.
HMRC argued that the claim was defective, as Value Added Tax Regulations 1995 (SI 1995/2518), reg. 37 required it to state the sum due and the manner of its calculation. The FTT had considered whether the claim represented a new claim, which was time-barred. The FTT had distinguished between:
- an adjustment to and an amendment of an initial claim; and
- an enlargement or enhancement of it by introducing extra distinct elements.
One issue was whether repayments of VAT due to the former Argyll and Clyde Health Board had been introduced to the disputed claim after the deadline, which had expired on 31 March 2009. The entitlement to claims of former Scottish Health Boards had passed to their successors. The geographical area of the defunct Argyll and Clyde Health Board and its responsibilities had been divided between the Appellant Board and the Highland Health Board. Although the reorganisation of the Scottish Health Boards resolved questions of succession and entitlement, it did restore potential claims of the defunct Board that were already out of time.
Additional elements, which are time-barred, may not be added to a claim. However, once removed from the claim, the additional elements did not invalidate it entirely. Refinements to a claim are permissible, but additions and extensions are not.
The Board computed the claim figures for 20 years by extrapolating from four base years. The FTT had questioned the validity of this extrapolation for a 20-year period, particularly when the four base years fell at uneven intervals.
The FTT had dismissed the Board's claim because:
- the Board had failed to prove that an amount of input tax was due to it; and
- in so far as the Board sought to advance a claim for input tax due to a predecessor authority, Argyll and Clyde Health Board, that was a new claim which was time-barred, because no figures for that Board had been included in the claim which had been made on 30 March 2009.
The Board appealed to the UT on the basis that the FTT had erred in law in refusing the appeal:
- the FTT's decision did not contain adequate findings in fact or reasons;
- the FTT had misdirected itself in law as to its jurisdiction. Given that the claim was a Fleming claim, and the FTT had found that the Board had substantially proved its case, but had not proved that a precise amount of input tax was repayable, the FTT's role ought not to have been restricted to determining if the Board had established that a specific amount of input tax was repayable. The jurisdiction of the FTT was wider than that in those circumstances: its role was to find a just solution. The FTT's jurisdiction was not as narrow as the FTT appeared to think;
- the FTT's decision was unreasonable. Its overall conclusion was that the Board had overpaid substantial VAT, but they were not entitled to recover any sum. Here, because the findings in fact were inadequate, it was not possible to approach matters applying the principles discussed in Edwards (HMIT) v Bairstow (1955) 36 TC 207. That was the most serious part of the complaint under this ground. Given the overall conclusion that substantial VAT had been overpaid, it had been unreasonable of the FTT not to make further findings accepting the Board's approach and allowing the appeal in whole or in part; and
- the FTT had erred in law in holding that the claim was time-barred in so far as it related to VAT paid by Argyll and Clyde Health Board. A timeous claim had been made on the part of the Board on 30 March 2009. The claim had been adjusted and refined since then, but it remained the same claim. Its fundamental character was unchanged. It was accepted that no element of the claim lodged on 30 March 2009 had contained any figure which related to Argyll and Clyde Health Board. However, that had been because until 2014 HMRC had not accepted that the Appellant Board had succeeded to any of the rights of that Board. In rejecting the Board's appeal, the UT rejected the claim that the Board had been left in the dark regarding the basis of the FTT's decision. On the contrary, the FTT had explained that it was not satisfied with important parts of the evidence, on which the Board's case depended. The FTT had decided that the Board's reliance on figures for only four years, with the four years being bunched in the middle of the 20-year period and with extrapolation using RPI, was unsatisfactory and failed to comply with reg. 37. The FTT had clearly stated that:it was not satisfied with the Board's apportionment between business and non-business supplies;it did not accept the Board's calculation of a partial exemption special method (PESM) was valid (in particular because the numerator and denominator were from different years); andit was not satisfied that all VAT on contracted out services (COS) had been properly identified and taken account of in the Board's calculations (para. 25 of the decision).
The UT held that the FTT had not misdirected itself regarding its jurisdiction. It proceeded on the basis that, in demonstrating that an amount was due, reasonable and sustainable estimation or approximation by the Board might be legitimate. It correctly approached the appeal on the basis that the Board must satisfy it on the balance of probabilities that the Board was entitled to repayment of certain input tax. The FTT had correctly identified its jurisdiction and properly considered s. 80 and reg. 37. The...
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