Standard Chartered Plc and Anor; Lloyds Banking Group Plc and Anor
| Jurisdiction | UK Non-devolved |
| Judgment Date | 31 March 2014 |
| Neutral Citation | [2014] UKFTT 316 (TC) |
| Date | 31 March 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 316 (TC)
Judge Roger Berner; Mr Nigel Collard
For the Standard Chartered Appellants: Roderick Cordara QC, instructed by PricewaterhouseCoopers LLP
For the Lloyds Appellants: David Scorey, instructed by Deloitte LLP
For the Respondents: Peter Mantle, instructed by the General Counsel and Solicitor to HM Revenue and Customs
VAT - Claims under VATA 1994, s. 80 - VAT groups - Sixth Directive, subsec-or-para 4 article 4art. 4(4), (Principal VAT Directive, art. 11, ) - VATA 1994, s 43 - Entitlement to claim - Effect of individual taxable member joining a VAT group on VAT overpayments arising prior to that event - Effect of all the members of one VAT group joining a second VAT group on cessation of the first VAT group on VAT overpayments arising during the currency of the first VAT group - Effect of company leaving the second VAT group on VAT overpayments arising during the currency of the second VAT group.
The First-tier Tribunal (FTT) dismissed the appeals by the Appellant companies and upheld HMRC's rejection of various claims for repayment of overpaid VAT where grouping provisions applied during certain periods and the membership of the group changed.
The grouping provisions in Value Added Tax Act 1994s. 43 treat as a "single taxable person" certain persons who, although legally independent, are closely bound to one another by financial, economic and organisational links. The issue is where the right to claim a VAT repayment under section 80s. 80 resides in three instances. The first instance is where, in relation to a company that was both the company that carried out the relevant transactions and also the representative member of a VAT group, amounts were wrongly declared as output tax during the currency of that VAT group. Later that VAT group was dissolved and the members of that group became members of a second and existing VAT group, but with a different representative member although within the same overall corporate group. The relevant company subsequently left that second group and joined a third-party group.
The second instance is where, in relation to that same company, the VAT overpayments were made during the currency of the second VAT group.
The third instance is in relation to a separate company, which was individually registered at the time of the VAT overpayment, but which later joined the second VAT group before leaving that group and joining the third-party group.
Were there not to have been a change of ownership of the relevant companies, in this case Chartered Trust plc ("Chartered Trust"), now called Black Horse Ltd, and ACL Ltd ("ACL"), no issue is likely to have arisen. However, Chartered Trust and ACL were sold by the Standard Chartered group to the Lloyds Banking group in September 2000. Claims under section 80s. 80 have been made by both groups in relation to the relevant VAT overpayments. The result is that, whilst these appeals are solely concerned with the decisions of HMRC in relation to each of the appellants, the outcome of each appeal affects both groups. Although these appeals have not been joined together, they were directed to be heard consecutively by the same panel. The parties agreed that the FTT should issue a single decision in relation to both appeals.
There is considerable overlap in the claims made by the companies. Essentially, HMRC decided that, in relation to Chartered Trust, the person entitled to claim in respect of overpayments for the period during which the Chartered Trust VAT group existed (1973 to 1990) is Chartered Trust, and not Standard Chartered, even though Chartered Trust, and the members of the Chartered Trust VAT group, became members of the Standard Chartered VAT group in 1990.
However, for overpayments in relation to Chartered Trust for the period when that company was a member of the Standard Chartered VAT group (1990 to 1996), HMRC decided that it is Standard Chartered, as representative member of that group, that may claim, and not Chartered Trust, even though Chartered Trust left the Standard Chartered VAT group and joined the Lloyds group in September 2000.
In relation to ACL, HMRC decided that any section 80s. 80 claim for the period 1973 to 1996 when ACL was separately registered rests with ACL, and not with Standard Chartered, even though ACL subsequently joined the Standard Chartered VAT group.
The FTT considered where a Value Added Tax Act 1994s. 80 claim resides if an overpayment arises in a period when a company is not in a group as well as when it is in a group, the effect in either case where a company ceases to be separately registered, or a group is dissolved, and the company or the group members join another group. Also, the FTT considered the effect, if any, on the right to make a section 80s. 80 claim if the company whose activity gave rise to the claim during the period of that company's membership of a VAT group, leaves the group without the group having ceased to exist (para. 36 of the decision).
The FTT held that a VAT group operates for VAT purposes in relation to matters that either take place or are treated as taking place at the time the group relationship subsists. In respect of matters which, as a matter of VAT law (which may be the same or different from the actual commercial facts and the general law), take place before a company becomes a member of a VAT group, whether it is a new or an existing group, the creation of, or accession to, the group leaves those matters undisturbed. Rights and obligations arising out of those matters remain with the taxable person (which can be an individual taxable person or the single taxable person arising as a result of the grouping rules) that carried out the activities, or is regarded as having carried out the activities, which gave rise to those rights and obligations (para. 57 of the decision).
The FTT held that the "single taxable person" construct operates only as regards matters that take place, for VAT purposes, in respect of the constituent members of the group at a time when those persons are members of the group. It has no effect in relation to supplies made, or anything done, by persons at a time when they are not included in the group registration. It cannot have retrospective effect, although if, contrary to the real commercial position, the law deems something done at a time prior to the group relationship to be done for VAT purposes when the group exists, the grouping provisions have present effect in relation to that deemed state of affairs (para. 71 of the decision).
The FTT held the rights and obligations arising in respect of activities taking place, for VAT purposes, in relation to constituent members during the period of the group registration, that would, without the grouping provision, be those of individual taxable persons within the group, are not the rights and obligations of those individual members but are rights and obligations of the single taxable person. However, without an assignment, there is no basis on which the fiction of a single taxable person can extend to the assumption by another person, including the representative member of a group, of any rights and obligations of a person which arose before the time when that person joins the group, nor is there any succession principle that can have that result (para. 72 of the decision).
In relation to supplies made by members of the group during the currency of their group membership (which are treated as made by the representative member, representing or embodying the single taxable person), the representative member has all the relevant obligations under the VAT law. The representative member likewise acquires all the relevant rights under that law, including rights in respect of overpayments of VAT arising as a consequence of activities of a constituent member of the group which, for VAT purposes, take place at a time when that person is a member of the group (para. 74 of the decision).
While the group exists, the single taxable person endures, despite changes in the composition of the group by constituent members leaving or joining the group. The rights and obligations arising during the currency of the group, which are the EU law rights and obligations of the single taxable person, remain those of the representative member from time to time. The rights and obligations are those of the representative member as such, and not the rights and obligations of the particular company that happens to be the representative member. Accordingly, where there is a change in the representative member of a continuing group registration, the rights and obligations of the representative member as such devolve on the successor representative member (para. 75 of the decision).
The FTT considered the effect of a company leaving an existing group and held that the right to repayment of VAT overpaid in the period when a company was a member of that group is that of the single taxable person, represented and embodied by the representative member. That right does not leave the group with the departing member. It is only if reimbursement to the representative member (or, alternatively, to the person who has borne the tax by virtue of the joint and several liability under section 43 subsec-or-para 1s. 43(1)) is impossible or excessively difficult would there be any question of the company that has left the group being entitled to be reimbursed (para. 116 of the decision).
ACL was the taxable person in the relevant period in which it undertook the transactions which were treated as taxable supplies, but were not supplies. Thus, the FTT held that ACL has the claim for overpayment of VAT for the relevant periods. The fact that ACL joined the Standard Chartered group, thereby ceasing to be a taxable person, did not result in ACL's rights derived from its period as a...
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