TC03141: Iveco Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 December 2013 |
| Neutral Citation | [2013] UKFTT 763 (TC) |
| Date | 06 December 2013 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 763 (TC)
Judge Roger Berner
Andrew Hitchmough QC and Barbara Belgrano, instructed by PricewaterhouseCoopers Legal LLP, appeared for the Appellant
Eleni Mitrophanous, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax - Preliminary issue - Whether claim under Directive 77/388 (the Sixth VAT Directive), art. 11C(1) stopped by time limit in Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 section 80s. 80 or otherwise - Assumed bonus payments made in period 1 January 1978 to 31 December 1989 giving rise to reductions in taxable amounts - Value Added Tax Regulations 1995 (SI 1995/2518), reg. 38 - Jurisdiction of tribunal - VATA 1994, section 83 subsec-or-para 1s. 83(1) - Whether repayment claim otherwise barred under EU law by failure to claim in reasonable time.
The First-tier Tribunal ("FTT") held that no time limit under UK law applies to a VAT repayment claim submitted in 2011 by Iveco Ltd ("Iveco") in respect of certain payments of rebates (also referred to as "bonus payments" or "promotional payments") made in the period 1978 to 1989. Reg. 38 aimed to give effect to art. 11C(1), but was only introduced in 1990. Thus, the FTT held that reg. 38 applies without regard to the time limit in reg. 38(5). Thus, Iveco could adjust under reg. 38 to reflect its directly-effective right under EU law for any reduction made under art. 11C(1) due to paying the rebates. Except in relation to whether Iveco's EU law right had expired, the FTT decided the preliminary issue on any time limit in Iveco's favour.
Iveco sold commercial vehicles. Later apparently it paid rebates to customers.
On 9 November 2011, Iveco claimed under art. 11C(1) to recover VAT arising from payments of rebates made in the period 1978 to 1989. As such payments cut the consideration for the sale of the vehicles, it claimed a repayment of output tax on such sales. The repayment was calculated by applying the VAT fraction to the cut in the consideration.
As a preliminary issue, the FTT considered whether a claim by Iveco to recover VAT arising from payments of rebates in the period 1 January 1978 to 31 December 1989 is subject to the four-year time-limit in VATA 1994, section 80 subsec-or-para 4s. 80(4) or is otherwise time-barred.
This preliminary issue proceeded on the assumptions that (1) the rebate payments were made, (2) they qualified as price reductions to reduce the taxable amount under art. 11C(1) and (3) Iveco is otherwise able to show an entitlement to a repayment of VAT (para. 4 of the decision).
Iveco argued that Value Added Tax Act 1994 section 80subsec-or-para 1s. 80(1) did not apply to its repayment claim because there was no amount of output tax not due that had been accounted for, but that a claim could be made under section 80 subsec-or-para 1Bs. 80(1B), which relates to overpayments of VAT in other circumstances (para. 7 and 8 of the decision).
The FTT held that, regarding the rebate payments, Iveco did not, before its November 2011 claim, bring into account as output tax any amount that was not output tax due, and furthermore that it did not pay any VAT that was not due. Thus, section 80s. 80 does not apply to the claim (para. 40 and 44 of the decision).
The FTT held that, to the extent that it has not done so already, Iveco may adjust under reg. 38 to give effect to its directly-effective right to a reduction in the taxable consideration of its supplies, to the extent that it is shown that such a reduction should be made in consequence of the bonus payments made before 1 January 1990 (para. 53 of the decision).
Following the conclusion that reg. 38, construed to give effect to EU law, provides a remedy for Iveco in respect of its claim, the FTT did not need to consider whether any conforming interpretation of section 80s. 80 is possible (para. 54 of the decision).
The FTT held that Value Added Tax Act 1994 section 83subsec-or-para 1s. 83(1)(b) is capable of encompassing appeals on all questions relating to the chargeability of supplies. It is wide enough to include such questions arising from the direct application of a VAT Directive, in so far as those questions bear on the chargeability of a taxable person to VAT, which includes questions as to the manner in which the domestic provisions may be applied, or construed in applying, to the charge to tax under either domestic or EU law (para. 59 and 60 of the decision).
HMRC argued in the alternative that, if section 80s. 80 does not apply, and that the FTT has jurisdiction to consider Iveco's directly-effective right under EU law, that EU right expired long before Iveco sought to exercise it.
HMRC argued that, if Value Added Tax Act 1994 section 80subsec-or-para 4s. 80(4) did not stop the claim, using a directly-effective right under the Sixth VAT Directive was stopped once a reasonable period had expired because the right to claim had expired before Iveco claimed the repayment. However, that issue was put to one side as it is being considered by the Court of Appeal in R & C Commrs v GMAC UK plc (formerly General Motors Acceptance Corp (UK) plc)VAT[2012] BVC 1939 (para. 6 and 64 of the decision).
The proceedings were adjourned in relation to the issue of the expiry of Iveco's EU law right pending the judgment of the Court of Appeal in R & C Commrs v GMAC UK plc (formerly General Motors Acceptance Corp (UK) plc)VAT[2012] BVC 1939.
The VAT at stake is £73,361,865, so this case is hotly contested, but it affects few persons.
[1]I am asked to determine as a preliminary issue the question whether the claim of the Appellant, Iveco Limited ("Iveco") to recover VAT arising from payments of certain rebates that occurred in the period 1 January 1978 to 31 December 1989 is subject to the statutory time limit prescribed by section 80 subsec-or-para 4s 80(4) of the Value Added Tax Act 1994 ("VATA") or is otherwise time-barred. The issue arises in the following way.
[2]Iveco is a distributor of commercial vehicles. It has appealed against a decision of HMRC on 23 January 2012, which was upheld on review on 19 April 2012, to refuse a claim for repayment of VAT, originally in the sum of £78,680,107, which related to certain bonus payments said by Iveco to have been made to customers in the period 1 April 1973 to 31 December 1989. That claim was made by letter from PricewaterhouseCoopers LLP dated 9 November 2011. On 8 February 2013, following the judgment of the Court of Justice in Grattan plc v R & C CommrsECAS (Case C-310/11) [2012] BVC 812, Iveco withdrew that part of its appeal that related to the period 1 April 1973 to 31 December 1977. As a result, the relevant period for the purpose of this preliminary issue is 1 January 1978 to 31 December 1989 ("the relevant period") and the sum claimed is consequently reduced to £73,361,865.
[3]Iveco is the representative member of a VAT group, with an effective date of registration of 31 December 1992. I understand that, subject to resolution of this preliminary issue, there is a question whether Iveco is the proper claimant in respect of the entities that carried out the various transactions. HMRC does not accept that Iveco is entitled to bring the claims at issue in the appeal; but that issue is not before me at this time.
[4]The claim is that group companies carried out certain transactions whereby those companies sold commercial vehicles but, at some stage after the sales had been concluded, made certain promotional payments ("bonus payments") to their customers. The claim is based on the ground that such bonus payments amounted to reductions in the consideration for the sale of the vehicles and a repayment was therefore sought calculated by reference to the VAT proportion applicable to the claimed reductions in consideration. HMRC do not accept any of the factual and legal elements of the claim, and this preliminary issue therefore proceeds on the assumptions, not admitted, that the bonus payments were made, that they would qualify as price reductions such as to result in a reduction of the taxable amount within article 11C(1) of the Sixth Directive1, and that Iveco is otherwise able to show an entitlement to a repayment of VAT.
[5]This preliminary issue is confined to the issue of the applicability of the time limit under section 80 subsec-or-para 4s 80(4) VATA and any other applicable time limit. If HMRC are right in their arguments on section 80 subsec-or-para 4s 80(4), Iveco would be out of time to recover the VAT it has claimed: as will be seen, section 80 subsec-or-para 4s 80(4) would preclude a claim in respect of an amount paid as output tax that was not due as output tax if the claim is not made within four years after the end of the accounting period in which the output tax that was not due was accounted for.
[6]If Value Added Tax Act 1994 section 80subsec-or-para 4s 80(4) does not preclude the claim, HMRC argue in the alternative that if section 80s 80 does not apply, the right of Iveco to make a claim to directly enforce the Sixth VAT Directive expired long before Iveco sought to exercise it. That argument, to the effect that the exercise of a directly-effective right under the Sixth Directive is precluded once a reasonable period has expired, did not find favour with the Upper Tribunal in R & C Commrs v GMAC UK plc (formerly General Motors Acceptance Corp (UK) plc); British Telecommunications plc v R & C CommrsVAT[2012] BVC 1939 ("GMAC/BT"). However, that issue is the subject of an appeal to the Court of Appeal. It was agreed, therefore, that no argument would be addressed to me at this stage, and that this issue, to...
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