R v Commissioners of Customs and Excise, ex parte Building Societies Ombudsman Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 26 October 2000 |
| Date | 26 October 2000 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Nourse, Mummery and Rix LJ.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Allen & Overy) for Building Societies Ombudsman Co Ltd.
Dr Paul Lasok QC and Peter Mantle (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases are referred to in the judgment:
Amministrazione delle Finanze dello Stato v SpA San Giorgio(Case 199/82) [1983] ECR 3595
Arnold v National Westminster Bank plc ELR[1991] 2 AC 93
Dansk Denkavit ApS v Skatteministeriet VAT(Case C-200/90) [1994] BVC 151; [1992] ECR I-2217
Ellerine Bros (Pty) Ltd v Klinger WLR[1982] 1 WLR 1375
Hayter v Nelson Home Insurance UNK[1990] 2 Lloyd's Rep 265
Henderson v Henderson ENR(1843) 3 Hare 100
Hoystead v Commissioner of Taxation ELR[1926] AC 155
L'Office Cherifien des Phosphates v Yasmashita-Shinnihon Steamship Co Ltd; The Boucraa ELR[1994] 1 AC 486
Marks & Spencer plc v C & E Commrs VAT[2000] BVC 35
R v C & E Commrs, ex parte Kay & Co LtdVAT[1997] BVC 128
Re South American and Mexican Company, ex parte Bank of EnglandELR[1895] 1 Ch 37
Royal College of Obstetricians and GynaecologistsVAT[1997] BVC 2083
SPAR Österreichishe Warenhandels AG v Finanzlandsdirektion für Salzburg (Case C-318/96) [1998] ECR I-785
Tradax Export SA v Cerrahogullari TAS (M Eregli)UNK[1981] 3 All ER 344
Value added tax - Judicial review - Mistaken registration - Claim for repayment of VAT mistakenly paid - Three-year cap on repayments - Whether VAT and duties tribunal decision that VAT mistakenly paid prevented three-year cap taking effect - Exercise of discretion to claw-back repayment outside three-year period - Whether claw-back assessment contrary to EC law -Value Added Tax Act 1994 section 80 subsec-or-para (4B)Value Added Tax Act 1994, s. 80(4B)(a).
The taxpayer ("BSOC") employed the independent Ombudsman and assisted in the regulation of authorised building societies. It registered for VAT on 1 July 1987 and paid VAT on subscriptions and other charges. On 5 June 1996 the commissioners accepted that VAT was not payable, but on 18 July 1996 it was announced that Parliament was to introduce a three-year cap on repayments of VAT, effective from that date. The commissioners delayed repaying the VAT. This policy was challenged and in due course the VAT and duties tribunal made a direction on 2 December 1996 that BSOC should be repaid. The decision took effect from 16 December 1996, but on 4 December 1996 Parliament made a resolution imposing the three-year cap with effect from 18 July 1996. This was later confirmed by enactment in the Finance Act 1997 which came into force with retrospective effect from 19 March 1997. On 23 January 1997 the commissioners repaid BSOC all its VAT. On 1 May 1997, the commissioners raised a claw-back assessment in respect of so much of the repayment as related to periods outside the three-year limit. On 16 July 1999, Moses J dismissed BSOC's application for judicial review of the assessment ([1999] BVC 368). BSOC appealed.
(1) Whether the commissioners could make a claw-back assessment in relation to a claim which had already been the subject of a decision by the VAT and duties tribunal.
(2) Whether the retrospective provisions of Value Added Tax Act 1994 section 80 subsec-or-para (4B)s. 80(4B)(a) of the Value Added Tax Act 1994 ("the 1994 Act") applied.
(3) Whether the commissioners acted fairly and rationally in deciding in their discretion to exercise a right to issue an assessment.
(4) Whether the assessment was contrary to EC law.
Held, allowing BSOC's appeal:
1. The tribunal had jurisdiction to determine the amount of any repayment, although there had been a dispute between the parties, so the question was whether the Finance Act 1997 legislation was intended to grant the commissioners power to override a prior judicial decision. On a proper construction it was not. Although the decision was not final at the date the new legislation came into force, the commissioners had not sought to question its validity by reference to their new powers and, once it had become final, they could not do so.
2. Under Value Added Tax Act 1994 section 80 subsec-or-para (4B)s. 80(4B)(a) of the 1994 Act, where any provision (1) affected the amount which the commissioners were liable to repay BSOC at the time of repayment and (2) was subsequently deemed to have been in force at the time of the repayment, the commissioners' repayment liability was to be determined in accordance with that provision. The three-year cap had been imposed on 4 December 1996, although not confirmed by Act of Parliament until later, and so was actually in force at the time of repayment rather than "subsequently deemed" to have been in force at that time. AccordinglyValue Added Tax Act 1994 section 80 subsec-or-para (4B)s. 80(4B)(a) did not affect the commissioners' repayment liability.
This was sufficient to determine the appeal in favour of BSOC.
3. Had this issue fallen to be decided, the commissioners' failure to consider the tribunal decision might have been relevant.
4. BSOC would probably not have had a remedy under EC law (although not decided).
Rix LJ: Introduction
1. This appeal arises out of a retrospective amendment to theValue Added Tax Act 1994 ("VATA 1994"), whereby the six-year time-limit for claiming repayment of overpaid VAT under Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) was transformed into a three-year limit (the "three-year cap"). The government's intention to introduce this amendment, with immediate effect, was announced by the paymaster general on 18 July 1996. The amendment became law on 4 December 1996, with retrospective effect to 18 July 1996, under a resolution made by Parliament pursuant to the Provisional Collection of Taxes Act 1968 ("PCTA 1968"). Legislation in terms of the PCTA 1968 resolution was in due course enacted as part of the Finance Act 1997, and came into force on 19 March 1997 with similar retrospective effect to 18 July 1996.
2. The appellant in these proceedings, the Building Societies Ombudsman Co Ltd ("BSOC"), is an independent Ombudsman which regulates authorised building societies. It registered for VAT on 1 July 1987. Thereafter it paid VAT in respect of subscriptions and other charges paid to it by participating building societies.
3. In January 1995, a case came to the notice of its accountants, BDO Stoy Hayward ("BDO"), in which the commissioners of Customs and Excise (the "commissioners") were contending that another regulatory body, the Institute of Chartered Accountants in England and Wales ("ICAEW"), was not VAT taxable. As a result, BDO wrote to the commissioners on 18 April 1995 asking for an appealable determination of BSOC's taxable status. In due course a VAT tribunal decision, upheld by Tuckey J in the Crown Office list, confirmed that ICAEW was not taxable. On 5 June 1996, the commissioners confirmed to BDO that, subject to an appeal in the ICAEW case, they accepted that BSOC's regulatory activities similarly did not constitute business activities and were therefore not liable to VAT. It was at this point that the Paymaster General's announcement of 18 July 1996 intervened. On 13 August 1996 BDO wrote to the commissioners to enclose "details of a claim in the sum of £1,306,212.60". A schedule enclosed with the letter listed outputs and inputs quarter by quarter from 1 September 1987. It omitted in error the first return for the period of July/August 1987 and to that extent understated the total of BSOC's possible claim.
4. During this period after 18 July 1996, the commissioners were trying, as a matter of general policy, to put off the repayment of claims until such time as legislative force could be given to the government's announcement of the three-year cap. Up until late September 1996 the commissioners' letters were phrased in terms of the refusal or rejection of claims. From 1 October 1996, their letters contained references to payment being merely deferred. This policy of refusal or deferral was challenged by a number of claimants, who did not include BSOC. On 29 October 1996, a VAT tribunal gave its detailed reasons in a number of appeals which were heard together. The lead appeal was in the name of the Royal College of Obstetricians and Gynaecologists VAT([1997] BVC 2083) ("RCOG") which therefore gave its name to the tribunal decision (the RCOG decision). The tribunal ruled inter alia that the policy of refusal or deferral was illegal and that specified amounts were due and payable to the appellant taxpayers. The tribunal regretted, however, that it did not have [the] power to order payment of the specified sums. Accordingly, the taxpayers involved in that decision (except for RCOG itself) applied for judicial review of the commissioners' decisions to refuse or defer payment and there was an expedited hearing of the applications, in which still further taxpayers joined. The matter came before Keene J, who delivered his judgment on 19 November 1996, sub nom R v C & E Commrs, ex parte Kay & Co LtdVAT[1997] BVC 128 ("Kay"). It is to be noted therefore that Kay is the name of the judicial review application which arose out of the RCOG decision. Keene J agreed that the policy of refusal or deferral was illegal and that the applicants were entitled to the outstanding sums without further delay.
5. On 14 November 1996, a few days before Keene J's judgment, BSOC lodged with a VAT tribunal an appeal which is at the heart of the present proceedings. Its notice of appeal identified no decision or letter of the commissioners which it disputed, but gave as its "Reason for Appealing" the following:
The commissioners have no discretion to delay or defer payment of £1,306,212.60 on the grounds that "capping" legislation is to be introduced.
6. On 29 November 1996, the commissioners, in the light of Keene J's judgment...
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