Oxfam v HM Revenue and Customs

JurisdictionEngland & Wales
CourtChancery Division
Judgment Date27 November 2009
Neutral Citation[2009] EWHC 3078 (Ch)
Date27 November 2009
Docket NumberCase No: CH/2008/APP/0646

[2009] EWHC 3078 (Ch)



Royal Courts of Justice

Strand, London, WC2A 2LL


The Honourable Mr Justice Sales

Case No: CH/2008/APP/0646

Her Majesty's Revenue and Customs

Mr David Milne QC, Mr Richard Vallat (instructed by Saffery Champness, Chartered Accountants) for the Appellant

Ms Sarah Moore (instructed by Solicitor's Office of HMRC) for the Respondents

Hearing dates: 14/10/09–15/10/09

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.


Mr Justice Sales:



This matter concerns a decision of the VAT & Duties Tribunal (“the Tribunal”) dated 30 July 2008 rejecting an appeal by the Appellant (“Oxfam”, a term which I use to include all companies in the appellant's group of companies) against a decision by the Defendants (“HMRC”) dated 10 January 2007 refusing to allow in full a claim by Oxfam for repayment of certain input value added tax (“VAT”) in respect of Oxfam's activities in the period 1 August 1997 to 30 September 2005. It comes before me both as an appeal under the Value Added Tax Act 1994 (“ VATA”) and also as a potential judicial review claim by Oxfam of the same decision of HMRC, as being in breach of what Oxfam says is its legitimate expectation based on an assurance given by HMRC.


By its appeal and judicial review claim, Oxfam seeks to challenge HMRC's decision in their letter of 10 January 2007 to amend the terms of a method for the apportionment of input VAT between the business and non-business activities of Oxfam (“the Approved Method”) agreed between the parties by a letter from HMRC dated 17 October 2000, countersigned by Oxfam, in relation to the recovery of VAT incurred by Oxfam on the costs incurred by it in securing unrestricted charitable donations (“unrestricted fundraising expenditure”).


The judicial review claim was issued in parallel with Oxfam's appeal to the Tribunal because of concerns on Oxfam's part regarding the jurisdiction of the Tribunal in respect of its claim based on public law principles and the doctrine of legitimate expectation. The judicial review claim was adjourned pending the outcome of the appeal to the Tribunal, and is now renewed before me in the form of an application for permission to bring judicial review proceedings rolled up with a hearing on the merits, if permission is to be granted.


So far as jurisdiction is concerned, Oxfam's concern was entirely understandable in the light of the practice of the Tribunal up to this point to refuse jurisdiction in relation to claims based on public law principles which may be brought by way of judicial review in the High Court. However, as I explain below, I consider that Oxfam's claim based upon public law principles and the doctrine of legitimate expectation could properly have been raised in its appeal to the Tribunal. The benefit of the Tribunal having jurisdiction to hear such claims is that the unattractive, costly and potentially time-consuming proliferation of applications to different bodies (the Tribunal and the High Court) can be avoided, and the Tribunal is in a position to consider all relevant points bearing on the same issue (namely, whether input tax could be reclaimed by the taxpayer) at one hearing, and to give a single ruling which completely determines that issue.


Since Oxfam did not (for understandable reasons) raise its legitimate expectation argument in its appeal to the Tribunal, I think that the correct approach for me is to treat that argument as a new argument raised on the appeal under VATA with the leave of the court and to rule upon it in the context of that appeal, applying principles of public law. Having given leave for the argument to be raised in the appeal, it is unnecessary for me to grant permission for the same argument to be brought by way of judicial review. (If I had reached a different conclusion about the jurisdiction of the Tribunal and of this court on a VAT appeal, I would have granted Oxfam permission to bring its judicial review claim and would have dealt with it on the substance of the legitimate expectation argument in the same way as I have done below in the context of this appeal).

Oxfam's Activities


Oxfam is the well-known charity, which provides various forms of humanitarian relief for the developing world, supports development and campaigns for lasting change to alleviate poverty. The Claimant is a private company limited by guarantee which has wholly owned subsidiaries, all being registered for VAT as a group. Oxfam is a member of Oxfam International, a separate legal entity registered in the Netherlands which co-ordinates the joint activities of Oxfam and related organisations in other countries.


Oxfam raises money for its activities by a number of means. For example, it carries on business through shops selling second-hand clothes and goods purchased from commercial suppliers and sold at profit. It also seeks to attract donations from members of the public. To that end, it has for some years engaged organisations which provide personnel who seek to stop people passing in the street and persuade them to make donations to Oxfam. Oxfam pays fees to these organisations. This is the unrestricted fundraising expenditure to which the appeal relates.


With the money which Oxfam raises from its commercial activities and from attracting donations, Oxfam carries on a number of activities. It is deemed for VAT purposes to engage in both business and non-business activities. In the course of its business activities, it makes supplies which, as the case may be, are taxable at the standard rate, are zero-rated or are treated as exempt from VAT. Where Oxfam makes business supplies which are taxable at the standard rate or are zero-rated, it is entitled to reclaim as input tax that VAT which it pays on supplies to it which are attributable to such supplies made by it. Where Oxfam makes non-business supplies, or business supplies which are exempt from VAT, it is not entitled to reclaim as input tax the VAT which it pays on supplies to it which are attributable to such supplies made by it. The question of attribution of supplies to Oxfam to the different sorts of supplies made by Oxfam is therefore of considerable importance, since it governs the extent to which Oxfam can reclaim input VAT paid by it.


Oxfam identifies VAT incurred in respect of supplies made to it, and where possible directly attributes those supplies (and the associated VAT) to its different activities. Where this is possible, the answer to the question whether such VAT may be reclaimed as input tax or not is straightforward. But there are supplies to Oxfam which cannot be directly attributed to one or other of the types of supply made by Oxfam in a simple manner. The extent to which the VAT on such supplies to Oxfam may be reclaimed by it as input tax then depends on a more complex method of attribution. The present case concerns the method of attribution to be applied in respect of the VAT on supplies which cannot be attributed exclusively to standard-rated and zero-rated business supplies by Oxfam (which may be reclaimed as input tax) nor attributed exclusively to non-business supplies or exempt business supplies (which may not be reclaimed as input tax), but which are partly attributable to both these categories (so that the VAT is partly reclaimable as input tax – I refer to this category of case as “a mixed case”).

The Legal Framework


The EU law governing the imposition of VAT at the relevant time was contained in the Sixth Council Directive 77/388/EEC. The recitals to the Sixth Directive indicate that the budget of the EU is to be funded from resources which include those accruing from VAT “obtained by applying a common rate of tax on a basis of assessment determined in a uniform manner according to Community rules”. Article 17 of the Sixth Directive is concerned with the right to deduct input VAT. Article 17(2) provides:

“In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay: (a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person …”.


In cases where it is difficult to be sure whether or not input tax is attributable to taxable supplies to be made by the taxpayer, the Sixth Directive does not provide detailed guidance but leaves it to Member States to arrive at a suitable method of attribution for the purposes of working out what input tax may be deducted and what may not. In the United Kingdom, the principal governing provision to deal with such cases is s. 24(5) of VATA, which provides:

“(5) Where goods or services supplied to a taxable person, goods acquired by a taxable person from another member State or goods imported by a taxable person from a place outside the member States are used or to be used partly for the purposes of a business carried on or to be carried on by him and partly for other purposes, VAT on supplies, acquisitions and importations shall be apportioned so that only so much as is referable to his business purposes is counted as his input tax.”


That provision does not provide detailed guidance as to how attribution should be made in a mixed case, and so leaves it to HMRC and the taxpayer to arrive at an appropriate method of attribution of input VAT as between taxable supplies and non-taxable supplies made by the taxpayer. (In some areas, more detailed legal regulations have been introduced, such as in relation to retail schemes as considered in GUS Merchandise Corp. Ltd v Customs and...

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