R (DFS Furniture Company Plc) v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MOSES |
| Judgment Date | 22 March 2002 |
| Neutral Citation | [2002] EWHC 807 (Admin) |
| Docket Number | CO/2001/2001 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 22 March 2002 |
[2002] EWHC 807 (Admin)
IN THE HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Moses
CO/2001/2001
MR RODERICK CORDARA QC and MR DAVID SCOREY (instructed by Messrs Landwell, London EC4A 3TL) appeared on behalf of the Claimant.
MR PETER MANTLE (instructed by the legal department of Customs and Excise, London SE1 9PJ) appeared on behalf of the Defendant.
In this application for judicial review the claimant, DFS, challenges with leave of the single judge a decision of the Commissioners dated 19th February 2001. The decision in that letter was that the Commissioners would not repay to DFS the sum of £6.2 million. That sum had been assessed by the Commissioners on 17th April 1997 pursuant to section 80(4)A of the Value Added Tax Act 1994 (“the 1994 Act”). It had been paid by DFS on 23rd June 1997 in response to the assessment. DFS had sought to recover that sum following a decision of the Court of Appeal in R v. Customs and Excise Commissioners ex parte Building Societies Ombudsman Co Ltd (“BSOC”) [2000] STC 892, which had been decided on 20th October 2000.
The essential issue in this application is whether there was an agreement between DFS and the Commissioners back in 1996 which, in the light of the decision of the Court of Appeal in BSOC, precluded the Commissioners from raising the assessment in April 1997. An explanation of why it is that DFS can raise this issue now requires a review of the facts of the statutory framework and the impact of BSOC on the correct interpretation of the relevant statutory provisions.
THE FACTS
DFS carries on business selling furniture. It arranged for interest free credit to be made available for its customers for purchases of furniture. It would then invoice the customer for the full purchase price. It would however receive from the finance house the purchase price less a commission agreed between DFS and the finance house for arranging the credit. DFS accounted for VAT on the gross purchase price invoiced to the client.
In Primback Ltd v. Commissioners Customs & Excise [1996] STC 757 the Court of Appeal ruled that DFS was only obliged to account for VAT calculated on the net purchase price it received from the finance house. In the light of that decision DFS made what appeared to be a substantial over-declaration of VAT, namely £6,207,224. It was that sum that was repaid by the Commissioners in December 1996.
This case has added piquancy because the European Court of Justice in Customs & Excise Commissioners v. Primback Ltd Case 34/99/2001 STC at 803 decided that the VAT payable on the sale of the furniture was in the circumstances of that case the full amount paid by the purchaser and not the net purchase price received by the seller from the finance house. Thus the Commissioners assert that there never was an over-payment of VAT by DFS. This is disputed by DFS, but it is not necessary either to explain the nature of the dispute, still less to resolve it.
On 18th July 1996, in a Parliamentary answer, the then Paymaster General announced a proposal to introduce with immediate effect a three-year limitation period (which became known as the three-year cap) applying retrospectively to refund claims in relation to VAT and other indirect taxes and to associated statutory interest.
The payment of the VAT by DFS occurred on voluntary disclosure being made on 26th July 1996. As a result of the decision in Primback DFS then sought to recover that overpaid VAT in August 1996. On 17th September 1996 DFS claimed repayment of £4,968,936 in respect of overpaid VAT for the accounting periods from June 1990 to March 1993. The Commissioners refused to repay what they accepted was overpaid. They sought to defer the repayment pending introduction of the three-year cap.
On 7th October 1996 the Commissioners wrote, having referred to the announcement of the Paymaster General on 18th July 1996 as follows:
“In the light of this the Commissioners have decided to defer accepting your Voluntary Disclosure. If the proposal fails to obtain Parliamentary Approval, payment will be made to you in full with statutory interest paid in respect of the delay.
The Commissioners believe that no Appeal in your case to the VAT and Duties Tribunal is available against the deferment of payment of the amounts claimed. If you, however, disagree with this view then you have 30 days from the date of this letter to Appeal…”
In 30th October 1996 DFS did indeed make a claim for repayment. They contended that the Commissioners were not entitled to defer repayment of what at that stage was accepted to be an overpayment of VAT. At the same time they issued a notice of appeal against “the decision not to repay, and/or the decision to delay repaying, sums due under section 80 of the VAT Act 1994, together with statutory interest, for overpaid VAT from the prescribed accounting period…” The notice of appeal referred to the decision of the Court of Appeal in Primback and contended that “Customs & Excise have no right to withhold repayment or deliberately delay repayment and that Customs & Excise should make the repayment together with statutory interest due forthwith…”
There then followed correspondence which is central to the resolution of the issue in this application. I shall return to that correspondence in detail.
Suffice it to say at this stage that the VAT Tribunal in Royal College of Obstetricians and Gynaecologists on 29th October 1996 took the view that there was no power had been conferred on the Commissioners to defer repayment of overpaid VAT pending introduction of the three-year cap. The tribunal did, however, observe, with regret, that it had no power to make an order for payment. Accordingly, judicial review was sought and on 19th November 1996 in R v. Customs & Excise Commissioners ex parte Kay [1996] STC 1500, a case which also involved the gynaecologists and the obstetricians, Mr Justice Keene, as he then was, decided that the Commissioners had no power to defer and that the taxpayers were entitled to repayment without delay.
On 4th December amendments imposing the three-year cap were introduced with retrospective effect back to 18th July 1996 pursuant to a resolution made by Parliament under the Provisional Collection of Taxes Act 1968. On 9th December 1996 DFS received the payment of the overpaid VAT and subsequently on 28th January 1997 withdrew the appeal which it had set in train back on 30th October 1996. The resolution pursuant to the 1968 Act was enacted in the Finance Act 1997, which came into force on 19th March 1997, and which, with similar retrospective effect, applied the three-year cap back to 18th July 1996, the date of the Paymaster General's announcement.
On 17th April 1997, in accordance with the warnings that it had previously given, the Commissioners raised an assessment seeking recovery of £6.2 million odd pursuant to section 80(4)A of the 1994 Act. On 23rd June 1997 DFS repaid that sum to the Commissioners pursuant to that assessment, which is known in the trade as a claw-back assessment.
On 17th November 2000 DFS sought repayment of that sum following the judgment of the Court of Appeal in R v. Commissioners ex parte BSOC, to which I have already referred. I should, I suppose, add that that was a decision in which a decision of mine was reversed.
Correspondence then ensued as to whether BSOC applied to the case of DFS, culminating in the decision letter of 19th February 2001 in which the Commissioners confirmed their decision not to repay the money that they had gained as a result of their assessment back in 1997 on the basis that DFS's position was distinguishable from that of the taxpayer in BSOC.
STATUTORY FRAMEWORK
The provisions relating to recovery of overpaid tax and the introduction of the three-year cap were set out in detail in the Court of Appeal decision in BSOC between paragraphs 15 and 30. The provisions relating to the claim for repayment of overpaid VAT is set out in sections 80(1) and (2):
“(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.
(2) The Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose.”
Section 80(6) refers to the need to make a claim in a form prescribed by the regulations.
Prior to 4th December 1996 sections 80(4) and 80(5) imposed a six-year time limit either from the date of payment, or the date when the mistake, by reason of which the over-payment was made, was discovered, or could with reasonable diligence have been discovered. As a result of the 1968 Act resolution and the Finance Act 1997 a cap of three years was imposed. By section 80(4):
“The Commissioners shall not be liable, on a claim made under this section, to repay any amount paid to them more than three years before the making of the claim.”
(4A) Where —
(a) any amount has been paid, at any time or after 18th July 1996, to any person by way of a repayment under this section, and
(b) the amount paid exceeded the Commissioners’ repayment liability to that person at that time, the Commissioners may, to the best of their judgment, assess the excess paid to that person and notify it to him.
(4B) For the purposes of subsection (4A) above the Commissioners’ repayment liability to a person at any time is —
(a) in a case where any provision affecting the amount which they were liable to repay to that person at that...
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