Revenue and Customs Commissioners v Earlsferry Thistle Golf Club
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 June 2014 |
| Neutral Citation | [2014] UKUT 250 (TCC) |
| Date | 02 June 2014 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2014] UKUT 0250 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Lord Tyre
Iain Artis, Advocate, instructed by the Office of the Advocate General for Scotland, appeared for the Appellants (HMRC)
The Respondent, Earlsferry Thistle Golf Club, was not represented
Value added tax - Jurisdiction of tribunal - Appeal by recipient of supply against refusal by HMRC to repay VAT erroneously charged on exempt supply - Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 section 80s. 80 - Exercise of Community law right to obtain repayment directly from HMRC - Whether tribunal erred in refusing application to strike out - Appeal allowed.
The Upper Tribunal considered HMRC's appeal against the refusal by the First-tier Tribunal (FTT) of their application to have the appeal by Earlsferry Thistle Golf Club struck out. It concluded that the FTT had no jurisdiction to hear an appeal in relation to a claim for payment made by the recipient of a supply outside of the statutory appeal regime. HMRC's appeal was allowed and the appeal by the golf club was struck out.
Earlsferry Thistle Golf Club (ET) is a members' golf club in Fife with premises adjoining those of The Golf House Club, Elie (GC). It paid an annual fee to GC to permit its members to play golf on GC's course at certain restricted times. For a period of 20 years to 2010, GC charged VAT on the fee but, following the judgment of the European Court of Justice in Canterbury Hockey Club v R & C CommrsECAS (Case C-253/07) [2008] BVC 824, ET formed the view that the fees should have been treated as exempt from VAT. GC paid an amount of £20,399.97 to ET and ET made a direct claim to HMRC "under EU law" for the balance it considered to have been overpaid, in the sum of £21,103.10. HMRC replied to the effect that VATA 1994, Value Added Tax Act 1994 section 80 subsec-or-para 1s. 80(1) clearly intended that payment of any claim made under that section ought only to be made to the person who accounted for the wrongly charged output. ET appealed to the FTT and on 4 January 2012, it applied for the appeal to be sisted pending the outcome of litigation which was then before the Upper Tribunal in the case of R & C Commrs v Bridport & West Dorset Golf Club LtdVAT[2012] BVC 1758. HMRC applied to have ET's appeal struck out on the ground that its claim did not meet the criteria of Value Added Tax Act 1994 section 80s. 80. The FTT concluded that HMRC were correct in that Value Added Tax Act 1994 section 80s. 80 did not apply to ET and that the only recourse for a refund lay with its supplier. However, the FTT held that in order for the amount of VAT overcharged to be determined with any certainty, a final decision of the Bridport case was required. Only when the amount of overcharged VAT was known could ET ascertain from GC if it had been correctly reimbursed and could the issue of a "direct effect" claim against HMRC be considered. The present hearing was to consider the appeal by HMRC against the refusal of its application to have ET's appeal struck out.
Lord Tyre observed that the effect of Value Added Tax Act 1994 section 80 subsec-or-para 1s. 80(1) was that a claim for repayment may only be made by a person who has accounted for output tax to HMRC, that is a supplier who has charged VAT to the recipient of its supply. There was no provision under Value Added Tax Act 1994 section 80s. 80 for a claim to be made to HMRC by the recipient of a supply who had borne the burden of the tax. Value Added Tax Act 1994 section 80 subsec-or-para 7S. 80(7) did, however, provide that HMRC were not liable to repay any amount paid to them by way of VAT "except as provided by this section", but in Investment Trust Companies (in liquidation)VAT[2013] BVC 124, the High Court had held that Value Added Tax Act 1994 section 80 subsec-or-para 7s. 80(7) must be construed as excluding all actions for repayment by a person who was not the taxable person who paid or accounted for the overpaid VAT. However, this was not necessarily the end of the matter because the possibility of a claim by the recipient of a supply had been considered under Community law in the cases of Reemtsma Cigarettenfabriken GmbH v Ministero delle FinanzeECAS (Case C-35/05) [2010] BVC 30 and Danfoss A/S v SkatteministerietECAS (Case C-94/10) [2013] BTC 315. The judge in Investment Trust Companies had considered those authorities and held that, despite the terms of Value Added Tax Act 1994 section 80 subsec-or-para 7s. 80(7), the principle of effectiveness required the admission of a claim by the recipient of a supply directly against HMRC for wrongly-paid tax which could not be recovered without excessive difficulty from the supplier.
HMRC submitted that the FTT should have allowed their application to strike out the appeal by ET because it had no jurisdiction under VATA 1994, Value Added Tax Act 1994 section 83s. 83 to entertain the appeal. Moreover, they maintained that any claim by ET directly against HMRC could only be made by means of an ordinary action based on unjust enrichment or by application for judicial review. HMRC also submitted that their letter informing ET that a claim made under Value Added Tax Act 1994 section 80s. 80 ought only to be made by the person who accounted for the wrongly charged tax was not an appealable decision in terms of Vehicle Excise and Registration Act 1994 section 83s. 83 and that the outcome of the Bridport reference to the ECJ had no bearing on the preliminary question of whether the FTT had jurisdiction to entertain the appeal by ET. Although ET was not represented at the hearing, a written submission was made on its behalf contending that the FTT had acted correctly in sisting the appeal to await the judgment in Bridport, that Value Added Tax Act 1994 section 83 subsec-or-para 1s. 83(1)(b) conferred an entitlement upon ET to contest the substantive issue of exemption of fees and gave the FTT jurisdiction to hear an appeal on that basis and that, because ET was asserting directly effective rights, the decision of the ECJ in Becker v Finanzamt Münster-InnenstadtECAS (Case C-8/81) [1982] ECR 53 required its appeal to be heard and did not permit it to be struck out. ET further contended that the FTT had erred in deciding that ET's remedy lay against GC. The error in treating the supply as taxable lay with the state and not with GC, and HMRC were not permitted to transfer responsibility for any redress to GC.
The tribunal held that the difficulty for ET was that HMRC's letter against which it appealed contained no decision on the substantive issue of whether VAT was chargeable on the fees paid by ET to GC. There was, therefore, no basis in law for an appeal under Value Added Tax Act 1994 section 83 subsec-or-para 1s. 83(1)(b). Further, it was established that a claim for repayment under Value Added Tax Act 1994 section 80s. 80 could only be made by the person who had accounted for and paid the tax to HMRC. The question was whether the FTT had jurisdiction to admit an appeal by the recipient of the supply in relation to such a claim. In the opinion of Lord Tyre, it did not. The rulings of the ECJ in Reemtsma and Danfoss made it clear that member states must provide a means by which the recipient of a supply can recover VAT wrongly paid to the supplier. If a member state provides for recovery of such tax by civil proceedings against the supplier to whom it was erroneously paid, it must provide a means of seeking repayment directly from the state only in so far as recovery from the supplier is impossible or excessively difficult. The method by which this result was to be achieved was, however, a matter for the member state to determine and in the UK this was not by means of the FTT. Applied to the circumstances of the present case, this meant that ET would, in principle, have a right of action against HMRC in the Sheriff Court or, possibly, in the Court of Session for repayment of VAT which it had not recovered and could not, without excessive difficulty, recover from GC. HMRC's appeal against the FTT's refusal to strike out the appeal was allowed and the appeal by ET was duly struck out.
The appeal primarily concerned the extent of the jurisdiction of the FTT in relation to the appeal by Earlsferry Thistle Golf Club. There was no dispute that the recipient of a supply had a direct right of action, in principle, against HMRC in respect of VAT wrongly paid to a supplier which it could not recover from the supplier without excessive difficulty. However, there was no right of action under VATA 1...
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