R v Commissioners of Customs and Excise, ex parte Kay & Company Ltd and Another and other appeals
| Jurisdiction | England & Wales |
| Judgment Date | 19 November 1996 |
| Date | 19 November 1996 |
| Court | Crown Court |
Queen's Bench Division (Crown Office List).
Keene J.
Roderick Cordara QC and Richard McManus (instructed by Paisner & Co) for Kay & Co Ltd and GUS Home Shopping Ltd.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Titmuss Sainer Dechart) for the Association of Optometrists.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Edwards Geldard, Cardiff) for Colaingrove Ltd.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Edwards Geldard, Cardiff) for the Greenlee Group plc.
Michael Sherry (instructed by Baker & McKenzie) for Rayner & Keeler Ltd.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Druce & Atlee) for National Provident Institution.
Roderick Cordara QC and Joe Smouha (instructed by Allen & Overy) for Allied Domeq plc.
Roderick Cordara QC and Joe Smouha (instructed by Allen & Overy) for the Mercers Company.
Dr Paul Lasok QC and Peter Mantle (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
Associated Provincial Picture Houses Ltd v Wednesbury CorpELR[1948] 1 KB 223
C & E Commrs v Arnold TAX[1996] BTC 5419
C & E Commrs v JH Corbitt (Numismatists) Ltd ELRVAT[1981] AC 22; (1980) 1 BVC 330
C & E Commrs v John Dee LtdTAX[1995] BTC 5345
C & E Commrs v Leightons Ltd TAX[1995] BTC 5176
C & E Commrs v Next plc; C & E Commrs v Grattan plcTAX[1995] BTC 5134
Carl Zeiss Stiftung v Rayner Keeler Ltd ELR[1967] 1 AC 853
Congreve v Home Office ELR[1976] 1 QB 629
Green v Hampshire County Council ICR[1979] ICR 861
IR Commrs v National Federation of Self-Employed and Small Businesses Ltd ELR[1982] AC 617
Marchioness Huntly v Gaskell [1095] 2 Ch 656
Mills v Cooper ELR[1967] 2 QB 459
Potco Realisations Ltd, Re; R v C & E Commrs, ex parte RichmondTAX[1989] BTC 5110
President of India v Lips Maritime Corp ELR[1988] 1 AC 395
R v Humphrys ELR[1977] AC 1
R v IR Commrs, ex parte MFK Underwriting Agencies Ltd WLRTAX[1990] 1 WLR 1545; [1989] BTC 561
R v IR Commrs, ex parte Unilever plc TAX[1996] BTC 183
R v Secretary of State for the Environment, ex parte Birmingham City Council [1987] RVR 53
R v Secretary of State for the Environment, ex parte Hackney London Borough Council WLR[1983] 1 WLR 524
Royal College of Obstetricians and Gynaecologists (MAN/96/967) No. 14,558, released on 24 October 1996
The Sennar (No.2) WLR[1985] 1 WLR 490
Thrasyvoulou v Secretary of State for the Environment ELR[1990] 2 AC 273
Woolwich Equitable Building Society v IR Commrs ELRTAX[1993] AC 70; [1992] BTC 470
Value added tax - Repayment of overpaid tax - Retrospective legislation proposed disallowing repayment after three years - Customs refused to make repayments in anticipation of legislation - Whether withholding of repayments lawful - Value Added Tax Act 1994 section 25 section 80 schedule 11 subsec-or-para 1Value Added Tax Act 1994, ss. 25, 80 and Sch. 11, para. 1.
This was an application for judicial review of Customs' decision to refrain from paying amounts of money agreed to be owing to the applicants in anticipation of proposed legislation. The applicants were Kay & Co Ltd and GUS Home Shopping Ltd, the Association of Optometrists, Colaingrove Ltd, Greenlee Group plc, Rayner & Keeler Ltd, National Provident Association, Allied Domecq plc and the Mercers' Company.
On 18 July 1996 the Paymaster General announced that a provision in the next Finance Bill would introduce a three-year limit to retrospective claims made under the Value Added Tax Act 1994 section 80Value Added Tax Act 1994, s. 80 (overpayment of VAT) orValue Added Tax Act 1994 section 25s. 25 (VAT credits in respect of under-claimed tax) on or after that date.
Customs immediately wrote to all VAT collectors instructing them not to pay claims which would be affected by the proposed legislation. Not only would payment on claims made after 18 July 1996 be withheld in so far as they related to periods more than three years earlier than the date of the claim, but so would claims made before that date but not yet paid. Customs wrote to the applicants stating that such claims would not be paid. Some of the letters appeared to be in terms of refusal to pay, but others were in terms deferring payment until the legislation should be passed.
The applicants fell into two groups: those claiming under Value Added Tax Act 1994 section 80s. 80 of the Value Added Tax Act 1994 for overpayment and those claiming payment of VAT credits underValue Added Tax Act 1994 section 25s. 25. Kay & Co Ltd and GUS Home Shopping Ltd ("Kay"), the Association of Optometrists ("the opticians"), Colaingrove Ltd ("Colaingrove"), Greenlee Group plc, Rayner & Keeler Ltd and Allied Domecq plc claimed recovery of overpayments. National Provident Association ("NPI") and the Mercers' Company ("Mercers") claimed VAT credits.
The main issue was whether Customs had power to defer payment of the claims in anticipation of legislation.
The opticians, in addition, claimed that a letter written to the professional body by Customs on 24 November 1993, intended to be communicated to their members, operated as a waiver of the then existing six-year time limit for making claims under Value Added Tax Act 1994 section 80s. 80. The opticians were waiting for the result of a case eventually decided in 1995, C & E Commrs v Leightons Ltd [1995] BTC 5176. Customs undertook to regard the time limit for relevant claims as running from the final decision in that case which in the event extended the time for making claims to the year 2001. The opticians claimed that they had a legitimate expectation that claims would be accepted up to 2001 and that for Customs to depart from that undertaking would be an unfair abuse of power.
Kay, Colaingrove and Greenlee had appealed to the tribunal, which rejected Customs' submission that in the circumstances they had a discretion to defer payment of claims, but the tribunal itself recognised that it had no power to direct Customs to make the payments. Those taxpayers, whose appeals had been allowed by the tribunal, contended that Customs were prevented by an issue estoppel from contesting their applications because of the tribunal's decision in their favour. To found a claim for issue estoppel, the matter had to have been decided between the same parties by a court of competent jurisdiction.
Customs contended that the Value Added Tax Act 19941994 Act did not specify any time within which settled claims were to be paid. They were required to act reasonably and in the interests of good administration. It was provided by Taxes Management Act 1970 schedule 11 subsec-or-para 1para. 1 of Sch. 11 to the 1994 Act that VAT was to be under the care and management of Customs. While normally that would mean processing any claim expeditiously and paying it once it had been verified, in some exceptional cases such as the present, good administration might require some delay. They therefore claimed a power to defer payment. They did not seek permanently to defeat a taxpayer's right to payment, although some of the letters to the applicants appeared to do so.
Held, granting declarations that the claims should be paid forthwith:
1. Neither Value Added Tax Act 1994 section 80s. 80 nor Value Added Tax Act 1994 section 25s. 25 of the 1994 Act conferred an express power on Customs to defer payment of sums established to be due to a taxpayer, and Customs could not rely onValue Added Tax Act 1994 schedule 11 subsec-or-para 1Sch. 11, para. 1. The latter provision had been held to confer a discretion on Customs to make concessions to the taxpayer, but it did not imply a power to impose a heavier burden on the taxpayer than that sanctioned by the statute. Customs had no power to defer payment of a claim once it had been established as well-founded. Such delay was ultra vires and unlawful and the applicants were entitled to repayment without further delay.
2. The opticians had a legitimate expectation that Customs would not depart from the undertaking in their letter of 24 November 1993 that the limitation period for making claims would be extended to the year 2001. There had been an agreement with the opticians' representative bodies contained in a formal statement intended to be brought to the attention of the members and relied on by them. It would be unfair and an abuse of power for Customs to depart from those representations. Depending on the terms of any future legislation, the opticians had until 2001 to submit claims.
Per curiam: The applicants who had succeeded before the tribunal could not rely on those decisions to found an issue estoppel against Customs. The parties were not the same as those before the tribunal since judicial review proceedings were brought in the name of the Crown and concerned public administration rather than an issue between the parties themselves. Nor was the tribunal a court of competent jurisdiction. It did not have a general supervisory power to review decisions of Customs but had only statutory powers under Value Added Tax Act 1994 section 83s. 83 of the 1994 Act. AlthoughValue Added Tax Act 1994 section 83 subsec-or-para (t)s. 83(t) included a claim for repayment under Value Added Tax Act 1994 section 80s. 80, there was no issue before the court in the present case as to Customs' liability to the applicants or as to the amount of that liability. The applicants had agreed claims for identified sums of money so that no questions relevant to Value Added Tax Act 1994 section 83 subsec-or-para (t)s. 83(t) arose.
All the applications for judicial review in this case concern decisions by the Commissioners of Customs and Excise, to refrain from making payment to the applicants of amounts of money agreed to be owing to the applicants under the VAT system. There are in all eight applications before me. In six of them the applicants are...
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