Taylor Clark Leisure Plc
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 December 2012 |
| Neutral Citation | [2013] UKFTT 792 (TC) |
| Date | 19 December 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 792 (TC)
Judge J Gordon Reid QC, FCIArb, Dr Heidi Poon CA, CTA, PhD
Philippa Whipple QC (of the English Bar) and Philip Simpson, Advocate, on the instructions of KPMG, Manchester, appeared for the Appellant
Andrew Young QC, instructed by the Office of the Advocate General for Scotland on behalf of HM Revenue and Customs, appeared for the Respondents
VAT - preliminary issues - Fleming (t/a Bodycraft) v R & C Commrs[2008] BVC 221 - time bar - group registration - effect of leaving group - effect of disbandment - whether timeous claim by a former member of group entitles the representative member to repayment - assignation of claims; whether Fleming claim, capable of assignation, existed; the nature of such a claim; whether claim lay in restitution; whether right to repayment assigned; VATA 1994, Value Added Tax Act 1994 section 43 section 43B section 80ss. 43, 43B and 80; FA 2008, Finance Act 2008 section 121s. 121
The First-tier Tribunal decided that a taxpayer company's claims for repayment of over-declared VAT in relation to output tax overpaid by its subsidiary company, which at one time was in the same VAT group as that of the taxpayer, were time-barred pursuant to Finance Act 2008 ("FA 2008"), Finance Act 2008 section 121s. 121. The taxpayer never made a claim under the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 section 80s. 80 and the subsidiary company did not make the claims during the relevant periods on behalf of the taxpayer. The Tribunal also decided that the taxpayer was not entitled to receive repayment of VAT overpaid since its rights to receive the payments were removed by the disbandment of the VAT group which it represented.
The taxpayer company appealed against HMRC's assessments to repay VAT which they paid in error to the taxpayer, in relation to output tax overpaid by its subsidiary company ("Carlton").
In 1973, the taxpayer registered for VAT and became the representative member of a statutory VAT group, wherein Carlton was a member. The taxpayer owned and operated a number of business and leisure facilities including bingo halls and cinemas. Its turnover was largely generated from a variety of bingo games and from various types of gaming machines. The taxpayer transferred its business and assets to Carlton in 1990 ("the 1990 agreement").
In 1997, the taxpayer transferred its shares in Carlton to its parent company ("TCL"). Carlton remained a member of the taxpayer's VAT Group. In 1998, TCL sold its shares in Carlton to a third party by a formal agreement containing a cross tax indemnity clause. Carlton left the VAT group as a consequence of that agreement.
In 2005, the ECJ held in Finanzamt Gladbeck v LinneweberECAS (C-453/02) [2007] BVC 227 ("Linneweber") that income from gaming machines was exempt from VAT. HMRC did not accept that Linneweber was relevant to the UK because they did not accept that the UK's tax treatment of gaming machines breached the principle of fiscal neutrality. In 2011, HMRC accepted that claims for repayments relating to bingo would be paid subject to verification, but claims relating to gaming machines would remain contested.
In 2008, the House of Lords decided Fleming (t/a Bodycraft) v R & C CommrsVAT[2008] BVC 221, confirming that the UK's capping legislation was unlawful in so far as it purported to be of retrospective effect. In consequence, FA 2008, Finance Act 2008 section 121s. 121 was implemented. It provided for a transitional period within which claims for overpaid output tax in any prescribed accounting period ending before 4 December 1996 could be made until 31 March 2009.
Throughout 2006-09, Carlton submitted a number of claims to HMRC for repayment of overpaid output tax. Those claims concerned various aspects of the bingo business, which Carlton had operated as part of the VAT group from 1990-98, and thereafter under its own VAT registration number. During those periods, the taxpayer made no approaches to HMRC seeking to reclaim overpaid VAT in respect of the bingo business formerly operated as part of the VAT group.
In 2009, HMRC paid the taxpayer the sum of £667,069 in relation to overpaid VAT, together with statutory interest of £663,300 in settlement of the claim lodged by Carlton. They issued assessments against the taxpayer for recovery of sums that had been paid incorrectly after realising that the claimant and the recipient of the repayment were not the same person.
(2) Whether the taxpayer's claims in relation to output tax overpaid by Carlton were time-barred under FA 2008, Finance Act 2008 section 121s. 121.
(3) Whether the taxpayer was entitled to receive repayment of VAT overpaid between 1973 and 1998.
Held, dismissing the taxpayer's appeal:
The person making the VATA 1994, Value Added Tax Act 1994 section 80s. 80 claim must normally be the person with the right to make the claim and to receive repayment. Thus, a claim may be made by the taxpayer itself, by its agent on its behalf, by its assignee, or by its successor. The only possible exception is where a claim is made by a VAT group representative but the group is disbanded before the claim is paid. In those circumstances, the claim falls to be paid to the taxpayer member of the disbanded VAT Group who generated the supplies that give rise to the right to repayment. In this case, that member was Carlton.
In principle and in general, if the wrong person makes a claim, and the person entitled to repayment does not make a timeous claim, the claim is extinguished and HMRC have no liability under VATA 1994, Value Added Tax Act 1994 section 80s. 80. Here, the taxpayer had never made a VATA 1994, Value Added Tax Act 1994 section 80s. 80 claim. It could not rely on the claims made by Carlton. Carlton did not make the claims in 2007 and 2009 on behalf of the taxpayer. HMRC had no liability to make repayment to the taxpayer of the sums claimed in either of its appeals. Thus, the claims made by the taxpayer in those two appeals were time-barred.
The Tribunal also held that in resolving the entitlement issue, there were two periods to consider. The first was the period between 1973 and 31 March 1990, when the taxpayer was the generating taxpayer. The second period was between 1 April 1990 and 1998, when the taxpayer was the VAT group representative and Carlton was the generating taxpayer.
The taxpayer's right to repayment for the first period was capable of assignation and was assigned to Carlton by the 1990 agreement. Intimation to the debtor was effected by Carlton by the January 2009 claim letter to HMRC in which the 1990 Agreement was expressly mentioned. If the taxpayer's right to repayment in respect of the first period was not so assigned then, its right to repayment became time-barred because it made no timeous claim under VATA 1994, Value Added Tax Act 1994 section 80s. 80 by 31 March 2009. Carlton became entitled, in respect of the second period, to make a claim for repayment and receive such payment when the VAT group was effectively disbanded on 28 February 2009. From that point, the taxpayer had no right to make a claim for repayment or receive such payment. It could not claim in a representative capacity, and it was not the generating taxpayer. Whatever right the taxpayer might have had to receive the payments made to it in 2009 was removed by the disbandment. It never made a claim under VATA 1994, Value Added Tax Act 1994 section 80s. 80. Thus, it was not entitled to receive repayment of VAT overpaid by Carlton.
1.These two appeals have an extremely complex background. They relate to output tax overdeclared between 1973 and 1998. We are only concerned at this stage with two preliminary issues. At the heart of the first preliminary issue is whether (i) the basis of the Appellant's claim to resist the assessments to repay VAT alleged to have been paid to it in error by the Respondents (HMRC) in 2009 is unsound by reason of time-bar; and (ii) the Appellant's claims for repayment of overdeclared VAT, in relation to output tax overpaid between 1973 and 1996, made in 2007 by another company, at one time in the same VAT Group as the Appellant (of which the Appellant was the representative member), but not made by the Appellant until after 31 March 2009, are time-barred. At the heart of the second preliminary issue is the question whether, if these rights and claims or (either of them) is not time-barred, the Appellant is the correct legal person entitled to resist repayment or receive repayment.
2.We were also concerned with a strike-out Application by HMRC, held over from an earlier stage in the proceedings by which they contended, broadly, that there are no appealable matters competently before the Tribunal. In the event, the Application was not insisted on by HMRC.
3.A Hearing on the preliminary issues took place at Edinburgh on 12 & 13 September 2012. Philippa Whipple QC (of the English Bar) and Philip Simpson, Advocate, appeared on behalf of the Appellant, on the instructions of KPMG, Manchester. She led the evidence of Reginald Harvey, the chief executive and a director of Taylor Clark Ltd, the holding company of the Appellant, and John Dippie, the financial director and company secretary of Taylor Clark Ltd. Andrew Young QC appeared on behalf of HMRC on the instructions of the Office of the Advocate General on behalf of HM Revenue and Customs. He led no evidence. A large bundle of documents was produced, but only a few of them were referred to in the course of the Hearing.
3.From about the inception of VAT, the Appellant accounted for VAT in full on certain revenues from bingo halls and other leisure activities, in accordance with HMRC's stated policy for such business activities and in common with other competitor businesses in the UK. In particular, the Appellant accounted for VAT on...
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