R (Sagemaster Plc) v Commissioners of Customs and Excise

JurisdictionEngland & Wales
JudgeLORD JUSTICE TUCKEY
Judgment Date21 January 2004
Neutral Citation[2004] EWCA Civ 25
CourtCourt of Appeal (Civil Division)
Docket NumberC3/2003/2263
Date21 January 2004

[2004] EWCA Civ 25

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

(MR JUSTICE MITTING)

Royal Courts of Justice

Strand

London, WC2

Before:

Lord Justice Tuckey

C3/2003/2263

The Queen on The Application of Sagemaster Plc
Claimant/applicant
and
The Commissioners of Customs and Excise
Defendant/Respondent

MR D MILNE (instructed by Messrs Berry & Berry, Tunbridge Wells TN1 1JA) appeared on behalf of the Applicant

The Respondent did not appear and was not represented

LORD JUSTICE TUCKEY
1

This is a renewed application for permission to appeal from Mitting J's refusal to give permission to the applicant, Sagemaster Plc, to apply for judicial review of VAT assessments dated 23rd December 2002 and 29th January 2003. The application for judicial review was made on 8th July 2003, more than three months after the date of the two assessments. Mitting J (and Silber J before him on the papers) refused permission because it was out of time. The application itself however states that it relates to:

"The refusal to change or withdraw [the] assessments …"

That refusal was not finally made until 9th April 2003. So, it is argued, the application was in time and if it was not, this was a case in which time should be extended. As I said when dealing with this application on paper, this is a debateable point. I approach the application however on the basis that if it otherwise has merit, it would not be right to refuse permission on the ground of delay.

2

The assessments in question were raised following a prolonged investigation by the Commissioners, who concluded that a number of transactions in which the applicant sold computer chips to a company in Ireland called Fancygrove formed part of what is known as a carousel fraud. The carousel starts to turn (if carousels turn) with a sale by a company in another European Union member state (like Fancygrove) to a UK company. No VAT is charged on that sale. The UK company then sells to a second UK company. VAT is paid on this transaction, but often the first UK company disappears and becomes what is known as a missing trader, the effect of which is that it does not account to Customs and Excise for the VAT which the second UK company was paid to it. The goods are then sold on through a number of UK buffer companies to what is called the UK broker company. The broker company then sells the goods back to the EU company which sold the goods into the UK in the first place, and so the carousel has made a full turn. The sale by the English broker company is zero-rated and this entitles it to recover the VAT it has paid to the last buffer company.

3

In the transactions which gave rise to the assessments in this case, the applicant is alleged to be the broker company. The Commissioners contend that involvement in a carousel fraud of this kind does not amount to genuine business activity and so the applicant is not entitled to repayment of the input tax which it has paid, even though it had no knowledge of the fraud. Repayments had been made to the applicant without prejudice. When the fraud was discovered the assessments were raised to recover what had been paid.

4

Appeal to the VAT and Duties Tribunal is the normal way of challenging VAT assessments, not judicial review. The applicant has appealed these assessments, but its appeal to the Tribunal is no doubt somewhat inhibited by the fact that in another case, Bond House Systems Ltd, which also involved sales to Fancygrove, the Tribunal has ruled in favour of the Commissioners, both that the taxpayer...

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