R (UK Tradecorp Ltd ) v C & E Commissioners
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lightman,MR JUSTICE LIGHTMAN |
| Judgment Date | 10 November 2004 |
| Neutral Citation | [2004] EWHC 2515 (Admin) |
| Docket Number | Case No: CO/322/2004 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 10 November 2004 |
[2004] EWHC 2515 (Admin)
The Honourable Mr Justice Lightman
Case No: CO/322/2004
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Jolyon Maugham (instructed by Michael Welch & Co, Ruskin House, 40/41 Museum Street, London WC1A 1LT) for the Claimant
Mr Rupert Anderson QC, Mr Hugh McKay & Ms Nicola Shaw (instructed by The Solicitor for Customs and Excise, New King's Beam House, 22 Upper Ground, London SE1 9PJ) for the Defendants
INTRODUCTION
1. This application for judicial review is made by UK Tradecorp Limited (“the Claimant”) with the permission of Moses J granted on the 29 th April 2004. It relates to the investigation by the Commissioners of Customs and Excise (“the Commissioners”) into the Claimant's twelve monthly VAT returns during 2003 in which the Claimant claimed repayment of input tax. For each of the monthly returns for 2003 the Claimant claimed repayment of input tax. The total amount of input tax reclaimed was £2,569,072. Apart from the claim for £246,698 for the period of June 2003 which has been rejected and is the subject of an appeal to the VAT and Duties Tribunal (“the Tribunal”), the Commissioners have repaid all the Claimant's repayment claims for 2003.
2. Initially on this application the Claimant sought declarations that the period taken by the Commissioners to reach decisions on the Claimant's claims to recover input tax in respect of seven months in 2003, (namely January to March and June to September 2003) and the manner in which the Commissioners conducted the investigation breached the principles of the European Sixth VAT Directive (“the Sixth Directive”). No complaint was made in respect of the other five months, namely April and May and October to December 2003. Repayment claims in respect of those five months were processed by the Commissioners either without enquiry or, if following an enquiry, before the expiration of thirty days from the making of the claim. The Claimant accepted (or at least did not challenge) that those five repayment claims were dealt with reasonably and proportionately by the Commissioners. No claim was made for any relief other than declarations, and in particular no claim was made for interest or any damages or compensation.
3. At the hearing Mr Jolyon Maugham, counsel for the Claimant, and Mr Rupert Anderson QC, counsel for the Commissioners, both afforded me the greatest assistance for which I am grateful.
4. In the course of the hearing the Claimant sensibly and properly dropped its claim that the Commissioners had committed any breach of the principles of the Sixth Directive. The determination of the claim to the declarations of breach would have required of the court a lengthy and intense scrutiny of the underlying facts relating to each month. A somewhat similar, though not identical, exercise is shortly to be undertaken by the Value Added Tax Tribunal (“the Tribunal”) on the appeals by the Claimant from decisions of the Commissioners refusing to pay repayment supplements. It was plain, most particularly in the context where the only relief claimed was declarations in general terms, that this exercise served no useful purpose and required an inappropriate and extravagant expenditure of time by the Administrative Court. In its place the Claimant sought declarations to the following effect:
i) that in verifying the Claimant's claims for input tax for the periods in the calendar year 2003 the Commissioners were under a duty to act proportionately; and
ii) that the Commissioners’ failure to pay interest at LIBOR in respect of the period between (a) accrual of the Claimant's right to input tax (i.e. the date of submission of its claims); and (b) actual payment of that input tax breaches the Commissioners’ duty to act proportionately.
In view of the fact that claims by the Claimant for repayment of input tax would continue to be made to the Commissioners in the future, the nature of the Claimant's business and low profit margins on goods which it purchases and sells which make its ability to trade dependent on expeditious repayments, the Claimant also asked the court to provide guidance as to the law in respect of the areas where the breaches had been alleged. Moses J made plain in his judgment giving permission the desirability of the provision of such guidance both to the Claimant and traders generally.
5. I should make four initial observations on the matters raised before me: (1) the claim to the first declaration, namely that the Commissioners were under a duty to act proportionately, is plainly merely a preliminary to the second declaration sought, for the duty to act proportionately is both well established in law and accepted by the Commissioners; (2) the claim to the second declaration is in substance a claim to two separate declarations, namely that the Claimant's right to input tax arises on the date of submission of its claim to deduction and payment of input tax and that the Commissioners are liable to pay interest on the sum in question from that date to the date of payment; (3) both of these claims raise questions of far-reaching importance, and on the issue of interest on which there is little (if any) guidance beyond that which can be extracted from the Opinion of the Advocate General and the Judgment of the European Court in Garage Molenheide [1998] STC 126 (“Molenheide”); and (4) as regards the request for guidance, in the course of the hearing it became apparent how difficult it is to give any but the most general guidance and how limited is the scope for such guidance, because the Claimant is not a representative trader and because the real issues between the Claimant and the Commissioners lie, not so much in the general principles to be applied, but in their application to a broad range of factual situations which call for the exercise of judgment by the Commissioners. I shall, however, in the course of this judgment try to give the requested guidance so far as it is practicable to do so.
FACTS
6. The Claimant is a repayment trader which at different times during 2003 traded in a peculiar mixture of high value readily movable zero rated goods, and in particular software CDs, pearl necklaces, diamond jewellery, mobile phones and “Platinum XXX” Cards which (as Mr Anderson delicately explained) are cards which afford “low value” access to pornographic web sites. Such goods are often used as the ostensible subject matter of artificial transactions carried out by missing traders involved in “Missing Trade Inter-Community Fraud” (“MTIC”). MTIC frauds gave rise to loss of revenue to the Commissioners in the year to March 2003 of between £1.6 and £2.6 billion. All the Claimant's transactions began with a missing trader and all had features calling for an investigation, e.g. valuations which post-dated export, diamonds bought from a retail florist, counterfeit compact discs and low value suspect XXX cards. In a word, on their face the transactions were “dodgy”. In these circumstances it is common ground that all the Claimant's transactions required the Commissioners, in pursuance of their duty to the general body of taxpayers, thoroughly to investigate the Claimant's claims and seek verification that they were genuine and well founded. The investigations were thorough and complex and frequently required information from third parties and overseas authorities from whom the response time was lengthy and beyond the control of the Commissioners. The Claimant itself delayed the investigation by (in certain instances) failing to provide information requested as necessary to advance the investigation.
7. The chronology of key dates is as follows:
| Period | Goods dealt in | Amount | Exported to | Date of Claim | Date of Payment |
| Jan | Software CDs | 309,119 | Dubai | 31 Jan 2003 | 14 May 2003 |
| Feb | Software CDs/Pearl Necklaces | 115,075 | Ukraine/Dubai | 3 March 2003 | 16 June 2003, 29 March 2004 |
| Mar | Diamond Jewellery/ Pearl Necklaces | 332,349 | Dubai, Russia/ Spain | 3 April 2003 | 15 July 2003 |
| April | Mobile Phones | 136,204 | Holland | 12 May 2003 | 17, 26 June 2003 |
| May | Mobile Phones | 123,510 | Holland | 30 May 2003 | 2 July 2003 |
| June | 3 x Mobile Phones | 378,047 | Holland, Austria | 7 July 2003 | 2 April 2004 |
| July | XXX cards | 292,360 | Denmark | 6 Aug 2003 | 14 April 2004 |
| Aug | XXX cards/ Diamonds | 365,120 | Denmark/Dubai | 4 Sep 2003 | 14 April 2004 |
| Sep | Diamonds | 514,888 | Dubai | 13 Oct 2003 | 15 April 2004 |
| Oct | Jewels/ | Mobile Phones | 1,073 | Dubai/UK | 13 Nov 2003 23 January 2004 |
| Nov | Mobile Phones | 842 | UK | 24 Dec 2003 | 6 February 2004 |
| Dec | No trading | 501 | No trading | 12 Jan 2004 | 6 February 2004 |
8. The issues on which the Claimant originally sought declarations, notwithstanding the repayments had already been made, were how the Commissioners ought to have dealt with the claims for repayment of input tax made by the Claimant. In particular the Claimant sought declarations that:
i) the Commissioners failed to discharge the burden upon them of showing that the measures they took in dealing with its claims for input tax in the periods 01/03–03/03 and 06/03–09/03 were, whilst enabling them effectively to attain the objective of protection of the exchequer, the least detrimental to the Claimant's fundamental right under the Sixth Directive to deduct input tax;
ii) the Commissioners acted disproportionately in failing to make, in respect of the periods 02/03,...
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