Taylor Clark Leisure Plc v Revenue and Customs Commissioners
| Jurisdiction | Scotland |
| Judge | Lord Hodge,Lord Mance,Lord Reed,Lord Carnwath,Lord Briggs |
| Judgment Date | 11 July 2018 |
| Neutral Citation | [2018] UKSC 35 |
| Court | Supreme Court (Scotland) |
| Docket Number | No 10 |
| Date | 11 July 2018 |
[2018] UKSC 35
Lord Mance
Lord Reed
Lord Carnwath
Lord Hodge
Lord Briggs
Appellant
Andrew RW Young QC
David M Thomson QC
(Instructed by Office of Advocate General)
Respondent
Philip Simpson QC
David Scorey QC
(Instructed by KPMG LLP)
Heard on 11 April 2018
(with whom Lord Mance, Lord Reed, Lord Carnwath and Lord Briggs agree)
This is an appeal concerning a claim for repayment of unduly levied Value Added Tax (“VAT”) in the context of a VAT group of companies. The question is whether Taylor Clark Leisure PLC (“TCL”) is to be treated as having made claims for repayment within the time limit set by section 121 of the Finance Act 2008 (“ FA 2008”), namely by 31 March 2009, when another company, which was formerly a member of the VAT group, and not TCL made the relevant claims.
As I discuss below, the idea of a VAT group of companies was introduced to simplify the collection of VAT (a) by ignoring intra-group transactions and (b) by treating supplies by or to any member of the group in their dealings with entities outside the group as transactions by a single taxable person.
Several companies have sought to intervene in this appeal because of concerns that the determination of this appeal would affect their outstanding claims which are due to be heard by the Court of Appeal in January 2019. This court has declined to allow such intervention because this appeal is not directly concerned with questions raised in those appeals as to which company has a right to claim repayment of unduly levied VAT either when a company which has had the economic burden of paying VAT has left a VAT group or where a VAT group has been dissolved. I recognise that, nonetheless, my discussion of the nature of the statutory regime in the United Kingdom (“UK”) in relation to an extant VAT group will indirectly have a bearing on those issues.
TCL is now a dormant company. It was initially incorporated as Caledonian Associated Cinemas Ltd in 1935 and was reincorporated on change of name on two occasions before it acquired its current name in 1995. Between 1973 and 2009 TCL was the representative member of the Taylor Clark VAT Group (“the VAT Group”), in accordance with legislation which I discuss under the heading “VAT legislation” below. From 1973 until 28 February 2009, when the VAT Group was disbanded, the VAT registration number (“VRN”) of the VAT Group was 265 7918 16.
On 16 November 2007, Carlton Clubs Ltd (“Carlton”) submitted four claims to the Commissioners of HM Revenue and Customs (“HMRC”) under section 80 of the Value Added Tax Act 1994 (“ VATA”) for repayment of VAT output tax, which TCL as representative member of the VAT Group had accounted for in the years between 1973 and 1998 using its VRN as representative member of the VAT Group. TCL submits that it, as the representative member of the VAT Group, is entitled to rely on Carlton's claims because it asserts that those claims are to be regarded as having been submitted on behalf of the VAT Group which EU law treats as a single taxable person entitled to repayment of the unduly levied tax.
The dispute has arisen in the following way. In about 1990 TCL undertook a group reorganisation. Part of that reorganisation involved the transfer of its bingo business to Carlton, a member of the VAT Group which had been incorporated for that purpose under the name Leisurebrite Ltd, with effect from 1 April 1990. The transfer was effected by a letter dated 30 March 1990 (“the 1990 Asset Transfer Agreement”). In 1998 Carlton was sold out of the Taylor Clark group of companies and thus ceased to be part of the VAT Group. Thereafter Carlton accounted under its own VRN for VAT in relation to its bingo hall and other leisure business activities.
Until 2005 it had been wrongly assumed that income generated from bingo and gaming machines was to be treated as subject to VAT at the standard rate. But on 17 February 2005 the Court of Justice of the European Union (“CJEU”) ruled that income from gaming machines was exempt from VAT, whether the machines were operated privately or at licensed public casinos: Finanzamt Gladbeck v Linneweber (Joined Cases C-453/02 and C-462/02) [2005] ECR I-1131; [2008] STC 1069. HMRC initially thought that the Linneweber decision did not apply in the UK as it believed that the UK treatment of gaming machine income did not breach the principle of fiscal neutrality. Nonetheless, HMRC invited claims for the repayment of VAT on income from gaming machines and analogous activities.
In 2011 the CJEU decided that, as a result of the application of the principle of fiscal neutrality, bingo was not subject to VAT in the UK: Rank Group PLC v Revenue and Customs Comrs (Joined Cases C-259/10 and C-260/10) [2011] ECR I-10947; [2012] STC 23. In response, HMRC issued a Revenue and Customs Brief 39/11 in which they accepted that claims for repayments relating to bingo would be paid subject to verification. But HMRC, on their interpretation of the Rank Group judgment, continued to contest claims relating to gaming machines.
On 23 January 2008 the House of Lords held that UK legislation which imposed a shortened three-year time limit on claims for the refund of overpaid VAT in the period from 1973 to 4 December 1996 without providing for an adequate transitional period, which was fixed in advance, was contrary to European law: Fleming (t/a Bodycraft) v Revenue and Customs Comrs [2008] 1 WLR 195. In response to that judgment Parliament enacted section 121 of FA 2008, which disapplied the three-year time limit for claims to be made for over-declared or overpaid VAT in respect of periods up to 4 December 1996, if a claim was made before 1 April 2009.
In anticipation of the judgment of the House of Lords in Fleming, Carlton on 16 November 2007 submitted four protective claims for repayment of output VAT which TCL as representative member of the VAT Group had overpaid in accounting periods between 1973 and the first quarter of 1998. Carlton made the claims, which related to overpaid VAT on (i) mechanised cash bingo takings, (ii) gaming machine takings, (iii) participation fees, and (iv) added prize money and participation fees, on its own letterhead but using the VAT Group's VRN. In claims (i), (ii) and (iv) Carlton headed the claim using TCL's name but in claim (iii) it used its own name in the heading. Carlton submitted the claims without informing TCL. On 8 January 2009 Carlton submitted a revised claim (iv) in which it quoted its own name and VRN as well as TCL's name and the VAT group VRN. In the revised claim, as discussed below, it asserted a right to claim overpaid VAT back to 1973 (ie before its incorporation in 1990) by relying on the 1990 Asset Transfer Agreement, which it claimed had assigned to it the right to make such historic claims.
HMRC refused all of Carlton's claims and Carlton appealed against the refusal. HMRC then betrayed no little uncertainty as to how to proceed with the claims. Initially, on 27 April 2009 HMRC wrote to TCL as representative member of the VAT Group to confirm that they had processed a repayment of £667,069 together with interest. This was the sum claimed by Carlton in its revised claim (iv), which HMRC paid to TCL on 12 May 2009. HMRC then changed their minds and on 7 July 2009 notified TCL of an assessment for repayment of that sum and interest. HMRC then changed their minds again and withdrew the assessment on 27 October 2009. Thereafter, on 4 May 2010 TCL's advisers wrote to HMRC to assert its right to receive repayment under the other claims. In a lengthy exchange of correspondence, TCL accepted that it had not made the claims but asserted a right to repayment because the claims had been made in respect of VAT for which it, as representative member of the VAT Group, had incorrectly accounted.
In a decision letter dated 23 September 2010 HMRC (a) reversed their earlier decision concerning claim (iv) by confirming the assessments which sought repayment of the £667,069 and interest and (b) refused TCL's claim for repayment of the other claims. HMRC gave three reasons for their decision. First, they contended that TCL had not submitted claims before the expiry of the time limit imposed by section 121 of FA 2008. Secondly, HMRC stated that they had taken legal advice and expressed the view that the claims predating 31 March 1990 had been assigned to Carlton by the 1990 Asset Transfer Agreement. Thirdly, they asserted that because the VAT Group had since been disbanded, the claim for over-declared output tax must be made by the company whose activities gave rise to the over-declaration and Carlton had made that claim. This third reason reflected HMRC's policy at that time; now HMRC assert that the right to repayment remains with the last representative member of a disbanded VAT group. TCL requested a review of the decision and on review HMRC confirmed their decision and maintained their assessments.
TCL and Carlton pursued rival appeals against HMRC's refusal to repay the outstanding claims. TCL's appeals, which had been lodged in London, were transferred to Edinburgh so that they could be heard together with Carlton's appeals. On 26 January 2012 Carlton withdrew two of its appeals and intimated to the First-tier Tribunal (“FTT”) that HMRC had satisfied those claims. Carlton's representative also informed the FTT that Carlton had withdrawn another appeal because HMRC had repaid the claim to Carlton. The remaining appeal remains sisted (stayed). It thus appears that HMRC have paid to Carlton the sums claimed in three of the four appeals.
The FTT (Judge...
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