R v Commissioners of Customs and Excise, ex parte Kay & Company Ltd and Another and other appeals

JurisdictionEngland & Wales
Judgment Date19 November 1996
Date19 November 1996
CourtQueen's Bench Division

Queen's Bench Division (Crown Office List).

Keene J.

R
and
Customs and Excise Commissioners, ex parte Kay & Co Ltd & Anor and other appeals

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 VAT[1996] BVC 464

C & E Commrs v JH Corbitt (Numismatists) LtdELRVAT[1981] AC 22; (1980) 1 BVC 330

C & E Commrs v John Dee Ltd VAT[1995] BVC 361

C & E Commrs v Leightons Ltd VAT[1995] BVC 192

C & E Commrs v Next plc; C & E Commrs v Grattan plcVAT[1995] BVC 150

Carl Zeiss Stiftung v Rayner & Keeler Ltd (No. 2)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 of Huntly v Gaskell ELR[1905] 2 Ch 656

Mills v Cooper ELR[1967] 2 QB 459

Potco Realisations Ltd, Re; R v C & E Commrs, ex parte RichmondVAT(1989) 4 BVC 100

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 LtdWLRTAX[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 VAT(MAN/96/967) No. 14,558; [1997] BVC 2083

The Sennar (No. 2) WLR[1985] 1 WLR 490

Thrasyvoulou v Secretary of State for the EnvironmentELR[1990] 2 AC 273

Woolwich 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, s. 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, s. 80 (overpayment of VAT) or s. 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 s. 80 of the Value Added Tax Act 1994 for overpayment and those claiming payment of VAT credits under s. 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 s. 80. The opticians were waiting for the result of a case eventually decided in 1995, C & E Commrs v Leightons Ltd VAT[1995] BVC 192.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 1994 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 para. 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 s. 80 nor s. 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 on Sch. 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 s. 83 of the 1994 Act. Although s. 83(t) included a claim for repayment under s. 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 s. 83(t) arose.

JUDGMENT
Keene J: Introduction

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 entitled to be repaid sums overpaid by them by way of VAT payments. In the other two of them, those being the applications brought by the National Provident Institution (NPI) and the Mercers Company, the money is due because the applicants are entitled to VAT credits which have been underclaimed by them in the past. In simple terms, in those two cases the applicants have not claimed enough in the past for VAT paid by them on goods and services used by them in their businesses.

This matter has necessarily come on for hearing more quickly than would be normal. Leave was granted by Sedley J on 25 October 1996 in respect of the...

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