R v Commissioners of Customs and Excise ex parte Greater Manchester Police
| Jurisdiction | England & Wales |
| Judgment Date | 20 February 2001 |
| Date | 20 February 2001 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Aldous, Robert Walker, Hale LJJ.
Gerald Barling QC and J Anderson (instructed by Rakisons) for the appellant.
Phillip Sales (instructed by the Solicitor for the Commissioners of Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
London Borough of Haringey v C & E Commrs; C & E Commrs v London Borough of Haringey VAT[1995] BVC 314
Rhondda Cynon Taff County Borough Council VAT[2000] BVC 2226
Royscot Leasing Ltd v C & E Commrs VAT(Case C-305/97) [1999] BVC 419
Value added tax - Input tax - Refund of tax - Police authority - Motor cars - Order excluding supply of motor cars from input tax credit - Whether tax charged on supply of motor cars refundable to police authority as a public body - Value Added Tax Act 1994, Value Added Tax Act 1994 section 33 section 25 subsec-or-para (7)ss. 33, 25(7) - Value Added Tax (Input Tax) Order 1992 (SI 1992/3222), art. 7 - Council Directive 77/388, eu-directive 77/388 article 4(5)art. 4(5).
The appellant was a public body. It undertook both public duties and certain business activities. For the latter it received remuneration and charged VAT where appropriate. It was registered for VAT throughout the relevant period: 1 January 1993 to 31 January 1995. During that period it bought motor cars which were used to perform public duties. The appellant claimed a refund of VAT paid on those purchases underValue Added Tax Act 1994 section 33 subsec-or-para (1)s. 33(1) of the Value Added Tax Act 1994. The respondents refused on the ground that SI 1992/3222 section 7art. 7 of the Value Added Tax (Input Tax) Order 1992 (SI 1992/3222) ("the 1992 Order") blocked a claim to a refund under Value Added Tax Act 1994 section 33 subsec-or-para (1)s. 33(1) of the Value Added Tax Act 1994. The appellant appealed against a decision of Collins J refusing its application for judicial review ([2000] BVC 249).
Whether the appellant's claim to a refund was blocked byValue Added Tax Act 1994 section 33 subsec-or-para (6)s. 33(6) of the Value Added Tax Act 1994 and art. 7 of the 1992 Order; or whether, as the appellant contended, the words excluded from credit under [s. 25] in s. 33(6) restricted the blocking effect to VAT which could have been available as a credit under Value Added Tax Act 1994 section 25s. 25.
Held, dismissing the authority's appeal:
Value Added Tax Act 1994 section 33 subsec-or-para (6)Section 33(6) blocked claims to a refund of VAT if the VAT was of a type which Value Added Tax Act 1994 section 25 subsec-or-para (7)s. 25(7) excluded from credit under s. 25. The scope of s. 33(6) was not restricted to VAT which could actually have been available as a credit under s. 25. That construction would deprive s. 33(6) of any material effect and would be inconsistent with the intention of Parliament.
Aldous LJ:
[1] With leave of this court, the Greater Manchester Police Authority (Manchester Police) appeal against the order of Collins J of 22 May 2000. In that order he dismissed Manchester Police's application for judicial review.
[2] The issue between the parties concerns the construction of s. 33 of the Value Added Tax Act 1994. In short, this court has to decide whether Manchester Police can obtain a refund of VAT paid on the purchase of motor cars, marked and unmarked, during the period 1 January 1993 to 31 January 1995. The sum involved is about £500,000 and the decision affects other police authorities.
[3] Manchester Police is a public body which is charged with certain public duties under the Police Act 1994. It is funded in part by central government and in part by local government. It also undertakes certain business activities for which it receives remuneration and in respect of which it charges VAT where appropriate. It was registered for VAT during the relevant period.
[4] Manchester Police purchase and sell motor cars, both marked and unmarked, which they use to perform their public duties. They are charged VAT upon such purchases.
[5] By letter dated 6 December 1998 to the respondents, the commissioners of Customs and Excise ("the commissioners"), Manchester Police sought a refund of the VAT paid on its purchases of new motor cars to be used for public duties. The commissioners replied giving their view that Manchester Police was not entitled to a refund. Further correspondence ensued, but the commissioners maintained their position with the result that the claim for a refund was finally refused on 26 March 1999. As no appeal was possible, an application for judicial review was issued on 21 May 1999. The Form 86A sought an order quashing the decision of the commissioners and a declaration that s. 33 of the 1994 Act, when applied in conformity with eu-directive 77/388 article 4(5)art. 4(5) of the Council Directive 77/388, entitled Manchester Police to the refund of the VAT claimed. As I have said, the application was dismissed by Collins J. Before coming to his reasons, it is appropriate to set out the relevant legislation.
[6] As is well-known, the concept behind VAT is that tax is charged on taxable supplies. Thus Value Added Tax Act 1994 section 1s. 1 of the 1994 Act requires VAT to be charged on, amongst other things, the supply of goods and services in the UK.Value Added Tax Act 1994 section 2Section 2 sets the rate of VAT. Value Added Tax Act 1994 section 3Section 3 defines a taxable person as one required by the Act to be registered. Value Added Tax Act 1994 section 4Section 4 contains the requirement that a taxable person should charge VAT on a taxable supply of goods or services. A taxable supply is defined as a supply of goods or services made in the UK other than an exempt supply.
[7] A person registered for VAT can reclaim (set-off) VAT paid by him. The provision for that concept is contained inValue Added Tax Act 1994 section 24ss. 24-29 of the 1994 Act. Section 24 defines "Input Tax" and "Output Tax" as being respectively VAT on the supply of goods and services provided to the taxpayer, and VAT on goods and services supplied by the taxpayer.Value Added Tax Act 1994 section 25Section 25 provides for payment of VAT after crediting input tax against output tax.Value Added Tax Act 1994 section 25 subsec-or-para (1)Subsection (1) states that the taxable person shall account and pay VAT in respect of supplies made by him and in respect of acquisitions by him from other member states of any goods.Value Added Tax Act 1994 section 25 subsec-or-para (2)Subsection 2 entitles the taxpayer to a credit for so much of his input tax as is allowable under Value Added Tax Act 1994 section 26s. 26 and then to deduct that amount from any output tax. Value Added Tax Act 1994 section 26 subsec-or-para (7)Subsection 7 enables the Treasury to make a credit exclusion order. It is in these terms:
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25(7) The Treasury may by order provide, in relation to such supplies, acquisitions and importations as the order may specify, that VAT charged on them is to be excluded from any credit under this section; and-
(a) any such provision may be framed by reference to the description of goods or services supplied or goods acquired or imported, the person by whom they are supplied, acquired or imported, or to whom they are supplied, the purpose for which they are supplied, acquired or imported, or any circumstances whatsoever; and
(b) such an order may contain provision for consequential relief from output tax.
[8] Value Added Tax Act 1994 section 26Section 26 is concerned with input tax allowable as a credit under Value Added Tax Act 1994 section 25s. 25. For the purposes of this judgment it is sufficient to set out the first two subsections:
26(1) The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under the regulations as being attributable to supplies within subsection 2 below.
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26(2) The supplies within the subsection are the following supplies made or to be made by the taxable person in the course or in the furtherance of his business-
(a) taxable supplies;
(b) …
(c) such other supplies … the United Kingdom and such exempt supplies as the Treasury may by order specify for the purposes of this subsection.
[9] Value Added Tax Act 1994 part IIPart II of the 1994 Act (Value Added Tax Act 1994 section 30ss. 30-40) deals with reliefs, exemptions, and repayments. Section 33 is concerned with refunds to bodies such as Manchester Police. It provides:
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33(1) Subject to the following provisions of this section, where-
(a) VAT is chargeable on the supply of goods or services to a body to which this section applies, on the acquisition of any goods by such a body from another member State or on the importation of any goods by such a body from a place outside the member States, and
(b) the supply, acquisition or importation is not for the purpose of any business carried on by the body,
the Commissioners shall, on a claim made by the body at such time and in such form and manner as the Commissioners may determine, refund to it the amount of the VAT so chargeable.
33(2) Where goods or services so supplied to or acquired or imported by the body cannot be conveniently distinguished from goods or services supplied to or acquired or imported by it for the purpose of a business carried on by it, the amount to be refunded under this section shall be such amount as remains after deducting from the whole of the VAT chargeable on any supply to or acquisition or importation by the body such proportion thereof as appears to the Commissioners to be attributable to the carrying on of the business; but where-
(a) the VAT so attributable is or includes VAT attributable, in accordance with regulations under Value...
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