R v Commissioners of Customs and Excise, ex parte Building Societies Ombudsman Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 16 July 1999 |
| Date | 16 July 1999 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Moses J.
Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Allen & Overy) for the BSOC.
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:
Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53
BP Supergas Anonimos Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion v Hellenic Republic VAT(Case C-62/93) [1995] BVC 385; [1995] ECR I-1883
C & E Commrs v Arnold VAT[1996] BVC 464
Commr of State Revenue (Victoria) v Royal Insurance Australia Ltd FCUNK(1994) 182 CLR 51
Dansk Denkavit & ApS v Skatteministeriet VAT(Case C-200/90) [1994] BVC 151; [1992] ECR I-2217
Garage Molenheide BVBA v Belgian State VAT(Joined Cases C-286/94, C-340/95 and C-47/96) [1998] BVC 106
Henderson v Henderson ENR(1843) 3 Hare 100
Institute of Chartered Accountants in England and Wales v C & E Commrs VATVAT[1996] BVC 2308 (Tr); [1996] BVC 228(QB)
L'Office Cherifien des Phosphates v Yamashita-Shinnihon Steamship Co Ltd ELR[1994] 1 AC 486
Marks & Spencer plc v C & E Commrs VAT[1999] BVC 107
Maunsell v Olins ELR[1975] AC 373
R v C & E Commrs, ex parte Kay & Co LtdVAT[1997] BVC 128
Royal College of Obstetricians and GynaecologistsVAT[1997] BVC 2083
Secretary of State for Social Security v TunnicliffeUNK[1991] 2 All ER 712
Société Financière d'Investissements SPRL (SFI) v Belgian State (Case C-85/97) [1998] ECR I-7447
SPAR Österreichische Warenhandels AG, Salzburg v Finanzlandesdirektion für Salzburg (Case C-318/96) [1998] ECR I-785
Value added tax - Assessment - Regulatory body - Repayment by Customs of overpaid tax - Claw-back of tax repaid by Customs consequent on imposition of three-year cap - Whether Customs entitled to make claw-back assessment - Whether assessment was contrary to EC law - Value Added Tax Act 1994 section 80 subsec-or-para (4A) section 80 subsec-or-para (4B)Value Added Tax Act 1994, s. 80(4A), (4B) (inserted by the Finance Act 1997 section 47 subsec-or-para (1)Finance Act 1997, s. 47(1)); Sixth Council directive (Directive 77/388) of 17 May 1977 (OJ 1977 L145/1), eu-directive 77/388 article 2 article 4 article 33art. 2, 4, 33.
This was an application for judicial review of Customs' decision to make a VAT assessment on the Building Societies Ombudsman Co Ltd ("BSOC") that Customs were entitled to claw back a repayment made in respect of sums caught by the three-year cap imposed by the Finance Act 1997.
BSOC registered for VAT in 1987 and duly paid tax in respect of subscriptions and other charges paid by the participating building societies. Following the decision of Tuckey J in Institute of Chartered Accountants in England and Wales v C & E CommrsVAT[1996] BVC 2308, it was accepted by Customs in February 1996 that bodies such as BSOC carrying out regulatory functions were not liable to VAT. Repayment of the VAT paid since 1987 was therefore made to BSOC by Customs on 23 January 1997.
BSOC's accountants, BDO Stoy Hayward ("BDO"), on 18 April 1995 when it was known that the Government intended to introduce a three-year limit for claims for repayment of overpaid VAT (the three-year cap), had written to Customs seeking an appealable determination as to whether BSOC made taxable supplies. On 18 July 1996, the paymaster general announced the introduction of a three-year cap, in respect of claims for repayment of VAT made on or after that date, to come into effect from that date, subject to parliamentary approval.
On 5 June 1996, Customs accepted that BSOC was not liable to VAT, but they did not make any repayment, having adopted a policy of deferring claims pending legislation introducing the three-year cap. But on 19 November 1996, it was held in R v C & E Commrs, ex parte Kay & Co Ltd VAT[1997] BVC 128 that the policy of deferral was unlawful.
BSOC had lodged an appeal to the tribunal, challenging Customs' deferral policy, which was set down to be heard on 2 December 1996. However, in view of the decision in ex parte Kay on 19 November, Customs did not contest the appeal and the tribunal made a consent order which took effect on 16 December 1996.
Parliament made a resolution on 4 December 1996 pursuant to the Provisional Collection of Taxes Act 1968 that the three-year cap should be imposed with effect from 18 July 1996.
On 19 March 1997, the Finance Act 1997 came into force confirming the three-year cap, and on 1 May 1997 Customs assessed BSOC in respect of the proportion of the sums they had repaid which were caught by the three-year cap.
BSOC applied for judicial review of the assessment raising four issues for decision:
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(2) whether the tribunal's decision on 16 December 1996 had finally determined Customs' liability to BSOC;
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(3) whether the Value Added Tax Act 1994 section 80 subsec-or-para (4A) section 80 subsec-or-para (4B)Value Added Tax Act 1994, s. 80(4A) and (4B) overrode the tribunal's decision;
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(4) whether, if Customs had a discretion to raise a claw-back assessment, that discretion was properly exercised; and
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(5) whether the power to issue a claw-back assessment was contrary to European Community law?
BSOC contended that the tribunal's decision finally determined its liability since the decision was not overridden by Value Added Tax Act 1994 section 80 subsec-or-para (4A) section 80 subsec-or-para (4B)s. 80(4A) and (4B) of the 1994 Act. However, if the legislation had overridden the tribunal's decision, Customs' power to issue a claw-back assessment would be discretionary and in the circumstances the assessment in this case was not properly exercised in that taxpayers in the same situation had been treated differently: in particular the treatment of local authorities and "repayment traders" i.e. traders whose input tax exceeded their output tax who were not required to repay the input tax paid to them.
BSOC further contended that a reference should be made to the European Court of Justice, on the ground that, in exercising their power to issue an assessment pursuant to Value Added Tax Act 1994 section 80 subsec-or-para (4A)s. 80(4A) of the 1994 Act, Customs were attempting to levy a charge by way of VAT. However, since BSOC fell outside eu-directive 77/388 article 2 article 4art. 2 and 4 of the sixth Council directive (Directive 77/388) (which set out the scope of the tax and identified taxable persons), an attempt to charge VAT was contrary to the directive. Alternatively, Customs were seeking to levy a turnover tax contrary to eu-directive 77/388 article 33art. 33 of the sixth directive which contained an implied prohibition on introducing a turnover tax other than that provided for by eu-directive 77/388 article 33art. 33itself.
BSOC relied on general principles of enforceable Community law, but such rights could only be relied on if the UK had failed to transpose or failed properly to transpose the sixth directive into UK law. Where the directive had been properly implemented, it was a matter for domestic law. BSOC sought to challenge that approach on the basis that once a directive had been implemented, the member state did not cease to be acting within the scope of Community law so that the overpayment by BSOC as a non-taxable person remained a matter of Community law.
Held, dismissing BSOC's application:
1. The tribunal's decision, coming into effect after the resolution on 4 December 1996 pursuant to the Provisional Collection of Taxes Act 1968, did not determine Customs' repayment liability which was limited, by s. 80 of the 1994 Act, to the three-year period before the making of a claim.
2. The tribunal's determination was overridden byValue Added Tax Act 1994 section 80 subsec-or-para (4B)s. 80(4B)(a) of the 1994 Act, deemed to have been in force since 18 July 1996, before the repayment was made. There was no unfairness in that conclusion since BSOC knew when the assessment was made that claw-back was a possibility.
3. Customs had a discretion whether to issue a claw-back assessment either by virtue of Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) or pursuant to their general discretion of management. Although BDO had written to Customs on 18 April 1995 in general terms about a repayment of VAT, the actual claim was not made until 13 August 1996 when details of the claim were sent to Customs. The prior correspondence did not amount to a claim. It merely demonstrated a debate as to liability. There was no claim made and agreed before 18 July 1996 within SI 1995/1978 section 37reg. 37 of the Value Added Tax Regulations 1995 which provided that a claim under Value Added Tax Act 1994 section 80s. 80 of the 1994 Act should be made in writing, by reference to documentary evidence, and should state the amount of the claim and the method by the amount was calculated.
4. BSOC's position was not comparable with that of other taxpayers such as local authorities, and its attack on the distinction between payment traders and repayment traders was not so much an attack on Customs' policy but rather on the legislation which failed to apply the cap to repayment traders.
5. The overpayments by BSOC arose because of a misinterpretation of UK legislation implementing the sixth directive rather than from any failure in breach of Community law properly to implement the directive. Retention of sums paid by way of VAT did not amount to the levying of tax, nor consequently could the process of recovery be characterised as the imposition of a tax. Moreover, the sums recovered bore none of the characteristics of VAT. In seeking to recover the sums repaid, Customs were not applying a general tax on consumption. In raising the assessment Customs were merely seeking once and for all to recover sums which they had previously retained but which they had repaid.
6. Although the question whether...
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