The Robinson Group of Companies Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 May 1999 |
| Date | 19 May 1999 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
British United Shoe Machinery Co Ltd VAT(1977) VATTR 187; (1977) 1 BVC 1062
C & E Commrs v McMaster Stores (Scotland) LtdVAT[1995] BVC 406
Genius Holdings BV v Staatssecretaris van Financiën VAT(Case 342/87) [1991] BVC 52
Lamdec Ltd VAT(LON/90/1018) No. 6078; [1991] BVC 721
McMaster Stores (Scotland) Ltd VAT(EDN/93/213) No. 12,322; [1995] BVC 1061
McNulty Offshore Services Ltd VAT(MAN/96/119) No. 14,824; [1997] BVC 2340
Repayment of VAT - Tax charged in error on bottled water - Claim, if made under VATA 1994, s. 80, restricted by capping - Alternative basis of claim under Value Added Tax Regulations 1995 (SI 1995/2518), reg. 38 applicable to increase or decrease of consideration occurring after prescribed accounting period - Agreement between the appellant and retailer that appellant would issue credit note and invoice for overpaid VAT - Whether decrease in consideration "included an amount of VAT" - Whether reg. 38 applied where zero-rated supply incorrectly standard-rated - Value Added Tax Act 1983 schedule 5 group 1Value Added Tax Act 1983, Sch. 5, Grp. 1, excepted item 4 (Value Added Tax Act 1994 schedule 8 group 1Value Added Tax Act 1994, Sch. 8, Grp. 1,excepted item 4); Finance Act 1989 section 24Finance Act 1989, s. 24 (Value Added Tax Act 1994 section 80Value Added Tax Act 1994, s. 80); Value Added Tax (Accounting and Records) Regulations 1989 (SI 1989/2248), reg. 6 and 7 (Value Added Tax Regulations 1995, reg. 37 and 38) and Finance Act 1997 section 47Finance Act 1997, s. 47.
The issue was whether the appellant had been entitled to adjust its VAT return in accordance with Value Added Tax Regulations 1995 (SI 1995/2518), reg. 38 on the basis that, in issuing a credit note and invoice to a customer under an agreement whereby it gave credit for overpaid tax on zero-rated supplies which had been incorrectly standard-rated, it had caused "a decrease in consideration for a supply which included an amount of VAT", so that Finance Act 1989 section 24Finance Act 1989, s. 24 (Value Added Tax Act 1994 section 80Value Added Tax Act 1994, s. 80) did not apply and its claim was therefore not capped.
The appellant was the representative member of a group of companies concerned in the production and supply of soft drinks and mineral waters, of which W was also a member. Prior to 1 December 1993, from which date bottled water was standard-rated, W had charged tax on supplies of mineral water to its retail customers. Following the lodging of an appeal to the tribunal, the commissioners accepted that the supplies should have been zero-rated. W then entered into written agreements with three well-known supermarket chains, pursuant to which the appellant made claims against the commissioners for overpaid tax and issued a credit note to the retailers, followed by an invoice for an amount which represented the payment to W of ten per cent of the amount of its claim. Effect to the agreements was given in respect of the appellant's VAT return dated 21 November 1996 for the period ending 27 October. However, before any repayments could be made Customs brought into effect a three-year limit for the repayment of overpaid tax. Correspondence followed, with W and its advisers insisting that W was entitled to be repaid in full and with the commissioners resisting the claim on the basis that it was made under Value Added Tax Act 1994 section 80s. 80 of the 1994 Act and consequently capped. On 18 March 1997, Customs issued a formal decision to that effect, whereupon the appellant appealed.
The appellant contended that the transactions between W and the three retailers constituted "a decrease in consideration for a supply which includes an amount of VAT …" within the meaning of reg. 38(1), so that it was entitled to adjust its VAT account and no issue of capping arose.
The commissioners contended that the claim was made under Value Added Tax Act 1994 section 80s. 80 of the 1994 Act and could only be made under that provision, so that the amount of the claim was to be reduced accordingly.
Held, dismissing the company's appeal:
1. The issue of a credit note and invoice pursuant to the agreements could only represent an adjustment of the appellant's VAT account under SI 1995/2518 section 38reg. 38 if the decrease in consideration included "an amount of VAT". While up until 1 December 1993, in charging tax the appellant had shown amounts in invoices to its customers as VAT which were recoverable by the commissioners by virtue of Value Added Tax Act 1983, Sch. 7, para. 6(2) (Value Added Tax Act 1994 schedule 11 subsec-or-para 5Value Added Tax Act 1994, Sch. 11, para. 5(2)) this did not turn what was not VAT into VAT.
2. Of the cases cited by each party in support of its argument, that of C & E Commrs v McMaster Stores (Scotland) LtdVAT[1995] BVC 406 was closer to the facts and was to be followed. The appellant's attempt to distinguish it on the basis that in that case the disputed supplies were exempt rather than zero-rated was misplaced. The proper distinction was between supplies on which VAT was and was not chargeable.
[The tribunal set out the facts summarised above and continued as follows.]
33. The question for our decision is whether the return operates at best as a claim under Value Added Tax Act 1994 section 80s. 80 of the Value Added Tax Act 1994 ("the 1994 Act"), in which case, it is agreed, the claim is subject to the three-year limitation and the amendment to the return effected by the commissioners' letter of 11 December 1996 is correct in principle, or whether, as the appellant contends, the transactions between Wells and the three customers described above constituted decreases in the consideration for supplies which included amounts of VAT within the meaning of SI 1995/2518 section 38 subsec-or-para (1)reg. 38(1) of the Value Added Tax Regulations 1995 (SI 1995/2518) ("the 1995 Regulations"), in which case the appellant was entitled to adjust its VAT account, and the return reproduced the material parts of the VAT account as it was required to do; this involves the question whether Finance Act 1997 section 47 subsec-or-para (8)s. 47(8) of the Finance Act 1997("the 1997 Act") applied.
34. In this connection McMaster Stores (Scotland) LtdVAT[1995] BVC 1061 on appeal, sub. nom. C & E Commrs v McMaster Stores (Scotland) Ltd...
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