S.J. Grange Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 21 November 1978 |
| Date | 21 November 1978 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Mr. S. Bates Q.C. and Mr. D. Shirley (instructed by Messrs. Herbert Smith & Co.) for the company.
The Solicitor-General (Mr. P. Archer Q.C.) and Mr. Woolf (instructed by the Solicitor for Customs & Excise) for the Crown.
Before: Lord Denning M.R., Bridge and Templeman L.JJ.
Value added tax - Single assessment for a number of prescribed accounting periods - Whether assessment restricted to "a prescribed accounting period" of three months - section 31Finance Act 1972, sec. 31 (now schedule 7 subsec-or-para 4Sch. 7, para. 4 but as amended).
This was an appeal by the Crown against an order of the Divisional Court which allowed an appeal by the taxpayer company from a decision of the Birmingham Value Added Tax Tribunal which had dismissed its appeal against an assessment in a single sum covering a period of 21 months.
The taxpayer company had been assessed for a single amount of tax in respect of a number of accounting periods between 1 April 1973 and 31 December 1974. The company appealed to the VAT Tribunal contending that the assessment was invalid since it referred to more than one "prescribed accounting period" of three months. The Tribunal dismissed the company's appeal holding that the Commissioners were authorised to make one assessment for several prescribed accounting periods. On appeal to the Divisional Court this decision was reversed, the court holding that there was an implied stipulation in section 31 subsec-or-para (1)Finance Act 1972, sec. 31(1) that an assessment had to be made in respect of a single "prescribed accounting period". The Crown appealed.
Held, allowing the Crown's appeal:
section 31 subsec-or-para (1)Finance Act 1972, sec. 31(1) contained nothing to indicate that an assessment had to be confined to a single prescribed accounting period. section 31 subsec-or-para (2) section 31 subsec-or-para (4)Finance Act 1972, sec. 31(2) and (4), which referred to "any prescribed accounting period", could be construed as referring to any prescribed accounting period which was included in the notice of assessment. To construe section 31 subsec-or-para (1)Finance Act 1972, sec. 31(1) in a way that permitted an assessment to be made for one prescribed accounting period only produced an unworkable and unreasonable result. The assessments made by the Commissioners showing tax due for a period of 21 months were, therefore, valid.
Lord Denning M.R.: We have heard this case urgently. We understand that many hundreds of cases before tribunals have been held up awaiting it. So we give judgment at once.
VAT was imposed by the Finance Act 1972. It came into force from the beginning of April 1973. Every trader has to send in returns every three months showing the amount of VAT payable by him. This is because every three months is a "prescribed accounting period" under section 30 subsec-or-para (c)sec. 30(c) of the Act. Forms are provided for this purpose. Each trader has to show what goods he has sold during the three months, together with the VAT on those sales. It is usually ten per cent. The trader is allowed to deduct the VAT which has been paid by him to his own suppliers. Then, taking the difference between the two amounts, the net tax is left which is payable by him for the three months.
S. J. Grange Ltd. are jewellers in Sherborne. They send in their returns every three months, that is, for every "prescribed accounting period". For the three months ending December 1973 they put in a net tax payable of £243.09. For the following three months, ended March 1974, it was £218.74. For the next three months, ended June 1974, it was £409.13. For the three months ended September 1974 it was £457.64. And for the quarter ended December 1974 it was £459.54. So everything looked as though it was in order. They sent in their returns for every "prescribed accounting period". They also paid, as they had to, to the C. & E. Commrs. the amount of tax which they said by their returns was payable.
The Commissioners have inspectors. They go round the country to help traders put in their returns. In so doing, they may find mistakes or omissions. They cannot visit everybody, but in January 1975 one of these inspectors visited S.J. Grange Ltd. He inspected this company's records. (The C. & E. Commrs. are entitled under the statute to call for all the documents relating to the goods - that is, the invoices and so on - to see if the trader has been keeping his accounts properly. That is section 35 subsec-or-para (2)sec. 35(2)(b)). The inspector looked at the books and took some of them away. Over the next few months there were nine meetings between representatives of S. J. Grange Ltd. and the C. & E. Commrs. Eventually in August 1975 there was a meeting which the accountants and the solicitors attended. Then there were further investigations. I will not go into the details, but the result was that the Commissioners came to the conclusion that these traders' returns were incomplete and incorrect. As a result, in July 1976 they made a notice of assessment on S.J. Grange Ltd. as the statute permits under section 31sec. 31.
On 15 July 1976 the Commissioners served this notice of assessment on S.J. Grange Ltd. of Cheap Street, Sherborne, Dorset:
Examination of your records for the period 1st April, 1973, to 31st December, 1974, has disclosed an under-declaration of the amount shown above £2,571.68. The sum should be paid at once to the VAT Central Unit, H.M. Customs and...
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