Thames Wines Ltd v HM Revenue & Customs

JurisdictionEngland & Wales
JudgeRobin Purchas
Judgment Date03 February 2017
Neutral Citation[2017] EWHC 452 (Admin)
CourtQueen's Bench Division (Administrative Court)
Docket NumberCO/6094/2016
Date03 February 2017

[2017] EWHC 452 (Admin)




Royal Courts of Justice


London WC2A 2LL


Robin Purchas QC

(Sitting as a Deputy High Court Judge)


Thames Wines Ltd
HM Revenue & Customs

Mr David Bedenham (instructed by Rainer Hughes) appeared on behalf of the Applicant

Mr Joshua Carey (instructed by Legal Department HMRC) appeared on behalf of the Defendant


DEPUTY JUDGE: In this claim the claimant seeks permission to apply for judicial review of the defendant's decision dated 7 November 2016 to deregister it for VAT. The claimant also seeks interim relief to suspend the deregistration until the hearing of the application if permission is granted.


The claimant traded as a wholesaler in the sale of alcohol and related products. It had been registered for VAT on 25 March 2015. From September 2015 its director was Mr Manjit Sahota.


The decision letter explained:

"I have obtained information that leads me to believe that Thames Wines Ltd is using its VAT registration solely or principally for abusive purposes. It is HMRC's position that the right to VAT registration does not arise when the principal aim of that registration is to abuse the VAT system."

The basis for that conclusion is set out in the letter which I consider later in this judgment.


As Mr David Bedenham, who appears for the claimant, explains that the effect of the deregistration is that the claimant cannot offset his input tax which would mean a twenty per cent increase in cost, which the claimant could not absorb with its profit level of six per cent. In the market the consequent erosion of competitiveness, he submits, with a price rise to cover the increase in cost would put the claimant out of business.


Under Section 83 of the VAT Act 1994 there is an appeal to the First Tier Tribunal which is by way of review of the defendant's decision. In the present case the claimant has appealed to the First Tier Tribunal against the decision of the defendant under that provision. However the First Tier Tribunal does not have power to grant interim relief and the hearing date is likely, Mr Bedenham submits, to be some way in the future, by which time the claimant will no longer exist because it will have been wound up as insolvent. Therefore, he submits, the statutory route of appeal is not an adequate or effective alternative remedy.


Mr Bedenham contends that the decision to deregister the claimant for VAT was unlawful because, first, there was no power to do so under the 1994 Act or otherwise in our domestic statutory legislation. Secondly, insofar as the decision purported to rely on European law as confirmed in Ablessio SIA, the defendant did not have sound evidence to demonstrate that the claimant's VAT registration was being used fraudulently. Thirdly, in any event, deregistration was not proportionate because it went beyond what was necessary for the objective of preventing VAT evasion. In these circumstances the claimant was entitled to apply, he submits, for judicial review of the decision on the grounds that it was unlawful and that there was no adequate alternative remedy because of the absence of the power to award interim relief. He further seeks the interim relief to which I have referred.

Legal Framework


Section 3 of the 1994 Act provides that —

"(3) A person is a taxable person for the purposes of this Act while he is, or is required to be, registered under this Act."

Schedule 1 paragraph 1 provides that a person who makes taxable supplies in excess of the prescribed level (that is £83,000 in the relevant twelve-month period) is liable to be registered.


By paragraph 13 —

"(2) Subject to sub-paragraph (5) below, where the Commissioners are satisfied that a registered person has ceased to be registrable, they may cancel his registration with effect from the day on which he so ceased or from such later date as may be agreed between them and him.


(5) The Commissioners shall not under sub-paragraph (2) above cancel a person's registration with effect from any time unless they are satisfied that it is not a time when that person would be subject to a requirement, or entitled, to be registered under this Act."


By Section 83 (1), there is an appeal from the decision of the defendant against deregistration of any person to the First Tier Tribunal. That is by way of review of the defendant's decision, including questions as to reasonableness and proportionality. The First Tier Tribunal has no power to award interim relief suspending the effect of the defendant's decision. It is common ground between the parties that the right to be registered under the 1994 Act does not come to an end because the registration is used for fraudulent or abusive purposes. However, it is also common ground that such a right does exist under European legislation. There is however an issue as to the scope of that power.


Domestic law for the imposition of VAT is to be applied in accordance with the principles of European law, including the Sixth Directive 2006/112, to the effect that Community law is not to be used or relied on for fraudulent or abusive ends. In particular, Article 273 of the Directive provides:

"Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers."


The position was considered by the Court of Justice of the European Union in Ablessio SIA Case C527/11. On the facts, the case concerned the refusal of the authority to register an enterprise on the grounds it had not assembled the appropriate material technical and financial resources to carry out the declared business activity. In its decision the court concluded:

"27 Consequently, Directive 2006/112, and particularly Articles 213 and 214, preclude the tax authority of a Member State from refusing to assign a VAT identification number to applicants solely on the ground that they are not in a position to show that they have at their disposal the material, technical and financial resources to carry out the economic activity declared at the time of submitting their application for registration on the register of taxable persons.

28 However, according to settled case-law of the Court, Member States have a legitimate interest in taking appropriate steps to protect their financial interests, and the prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged by Directive 2006/112 (see, in particular, Case C-255/02 Halifax and Others [2006] ECR I-1609, paragraph 71; Case C-285/09 R. [2010] ECR I-12605, paragraph 36; and Case C-525/11 Mednis [2012] ECR, paragraph 31).


30 Therefore, Member States can, in accordance with Article 273, first paragraph, of Directive 2006/112, legitimately take measures that are necessary to prevent the misuse of identification numbers, in particular by undertakings whose activity, and consequently their status as taxable persons, is purely fictitious. However, these measures must not go beyond what is necessary for the correct collection of the tax and the prevention of evasion, and they must not systematically undermine the right to deduct VAT, and hence the neutrality of that tax (see, to that effect, Case C-146/05 Collée [2007] ECR I-7861, paragraph 26; Nidera Handelscompagnie, paragraph 49; Dankowski, paragraph 37; and VSTR, paragraph 44).


32 It should be recalled that, under settled case-law of the Court, the identification as provided for under Article 214 of Directive 2006/112 and the obligations stipulated under Article 213 are only formal requirements for the purposes of control, and they cannot undermine, inter alia, the right of deduction or the right of exemption from VAT for an intra-Community supply, where the substantive conditions which give rise to these rights are satisfied (see, to that effect, Nidera Handelscompagnie, paragraph 50; Case C-263/11 Redlihs [2012] ECR, paragraph 48; and Mecsek-Gabona, paragraph 60).

33 It follows from this case-law that the registration of a taxable person in the register of taxable persons subject to VAT is a formal requirement, such that a taxable person cannot be prevented from exercising his right of deduction on the ground that he had not been identified as a taxable person for VAT purposes before using the goods purchased in the context of his taxed activity (see, to that effect, Nidera Handelscompagnie, paragraph 51, and Dankowski, paragraphs 33, 34 and 36). Therefore, the refusal to assign a VAT identification number cannot, in principle, have any effect on the taxable person's right to deduct input VAT if the material conditions giving rise to that right have been fulfilled.

34 In order to be considered proportionate to the objective of preventing evasion, a refusal to identify a taxable person by an individual number must be based on sound evidence giving objective grounds for considering that it is probable that the VAT identification number assigned to that taxable person will be used fraudulently. Such a decision must be based on an overall assessment of all the circumstances of the case and of the evidence gathered when checking the information provided by the undertaking concerned.

35 It is for the referring court – which alone has jurisdiction both to...

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