The Royal Bank of Scotland Group Plc

JurisdictionUK Non-devolved
Judgment Date01 January 2000
Date01 January 2000
CourtValue Added Tax Tribunal

VAT Tribunal

The Royal Bank of Scotland Group plc

Assessment - Time-limits - Difference between making and notifying assessment - In February 1997, the appellant made a return for the period 12/96 which included a claim for an amount of input tax in relation to which there was a dispute with Customs - Correspondence and discussions took place between the parties and on 17 December 1998 the commissioners wrote to the appellant stating that an assessment would be issued "as per the enclosed schedule" - Although there was a schedule enclosed which stated that the amount was "already assessed", it was accepted that the schedule itself did not constitute "an assessment" - On 6 January 1999, the appellant received a notice of assessment dated 5 January 1999, which was accompanied by no breakdown of the account and which did not give a date of the assessment itself - The appellant contended that the assessment was out of time, being issued more than two years after the end of the last prescribed accounting period - In the course of the hearing Customs argued, among other things, that the assessment had been made within a year of the relevant facts coming to their attention, but they had not pleaded this in their statement of case and it was not accepted by the tribunal - In their statement of case, Customs also stated that the assessment forms had been dated and countersigned on 14 December 1998, so that the assessment was made within the time-limits - However, the Form 641 relating to the assessment which was produced to the tribunal had not been countersigned - The tribunal expressed surprise that the statement had been made, since it implied that for an assessment to be valid such a countersignature was necessary and it followed that the assessment was not validly made - Held, that although the making and notifying of an assessment were, in purely mechanical terms, two separate acts, the making of the assessment was not complete until notification took place, since up to that point the process could be reconsidered - On that basis, despite Customs' attempts to cloud the issue by referring in correspondence to the making of the assessment as having taken place before notification, there was no evidence that it had in fact been made - On that basis, the assessment was out of time - Appeal allowed - Value Added Tax Act 1994 section 77Value Added Tax Act 1994, s. 77.

VAT Tribunal

The Royal Bank of Scotland Group plc

The following cases were referred to in the decision:

BICC plc VAT(LON/97/957) No. 15,324; [1998] BVC 2120

BP Supergas Anonimas Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion v Hellenic Republic VAT(Case C-62/93) [1995] BVC 385

C & E Commrs v Fine Art Developments plc VAT(1989) 4 BVC 26

C & E Commrs v Thorn Materials Supply Ltd VAT[1998] BVC 270

Davis Advertising Service Ltd (1973) VATTR 16

Garage Molenheide BVBA v Belgian State VAT(Joined Cases C-286/94, C-340/95, C-401/95 and C-47/96) [1998] BVC 106

Marks & Spencer plc v C & E Commrs VAT[1999] BVC 107

Marshall v Kerr ELRTAX[1995] 1 AC 148; [1994] BTC 258

Morgan Guaranty Trust Co of New York v Lothian RC 1995 SLT 299

R v C & E Commrs, ex parte Kay & Co LtdVAT[1997] BVC 128

Société Générale des Grandes Sources d'Eaux Minérales Françaises (SGS) v Bundesamt für Finanzen VAT(Case C-361/96) [1999] BVC 3

Repayment of VAT - Capping - Underclaimed input tax resulting in increase of output tax due - Whether amount paid over to Customs "VAT due to" them - Whether "VAT" as defined gross amount of tax charged or net amount paid after deduction of input tax - Value Added Tax Act 1994 section 25 section 26 section 80Value Added Tax Act 1994, ss. 25, 26 and 80; Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 17(2)art. 17(2)(a).

The issue was whether underclaimed input tax resulting in a net payment of more output tax than was properly due could properly be described as the payment of "an amount to the commissioners by way of VAT which was not VAT due to them …"

The appellant was the representative member of a VAT group registration which was partly exempt and operated a special method. Among its activities was the leasing of equipment, the tax on which it treated as residual VAT, whereas it was properly attributable to taxable supplies and fully recoverable. As a result of a special arrangement which it had with Customs for the correction of errors, on 14 August 1996 it disclosed the errors relating to the failure to attribute input tax between 1 October 1988 and 30 June 1993. Customs responded by ruling that the claim would be subject to the capping provisions announced on 18 July 1996. On 1 May 1997, regulations came into force restricting to three years the period in which a VAT credit due to a taxpayer could be reclaimed.

The appellant contended that the disputed tax was input tax wholly attributable to taxable outputs which it was entitled to recover in full. At the time when the claim was made capping only applied to repay overpaid output tax and this was not applicable to the facts of the case. In any event, the agreement between the parties on the method of correcting errors was in force at the time and applied. Taking the position of the bank itself within the VAT group, it was a repayment trader and during each accounting period it was owed an amount of input tax, so that Customs' principal argument did not apply. If these arguments did not prevail, the matter should be referred to the European Court of Justice.

The commissioners contended that the combined effect of Value Added Tax Act 1994, Value Added Tax Act 1994ss. 25(3) and 26 was that the amount of credit payable was any excess after deducting input tax from the output tax due in any proscribed accounting period, as distinct from the right to payment of that input tax. As the appellant had, apart from in one period, submitted payment returns its claim was for overpaid output tax, which was capped. The facts were not materially distinguishable from BICC plc VAT[1998] BVC 2120, which should be followed. Regulation 35, which required errors to be corrected by the taxable person, did not give the appellant any legal right to recover a sum. A reference to the European Court of Justice was unnecessary, since the law was clear.

Held, allowing the company's appeal:

1. The commissioners' argument that "VAT" was the sum produced by deducting input tax from output tax did not reflect the provisions of the Act. VAT was defined by Value Added Tax Act 1994,Value Added Tax Act 1994 section 96s. 96 as "… value added tax charged in accordance with this Act" and the only "VAT" which could be "charged" was output tax. This was not the same thing as an amount of money paid to the commissioners after an arithmetical calculation. What was paid over to Customs may have been tax, but it was not VAT as defined.

2. Value Added Tax Act 1994 section 80Section 80 of the Value Added Tax Act 1994 gave statutory force to the right to demand repayment of sums paid by way of VAT which was not due because some goods or services had been improperly made the subject of tax by the supplier and passed on to Customs.

3. In so far as the BICC plc case purported to say that the only way in which tax paid could be reclaimed was by way of a claim under Value Added Tax Act 1994 section 80s. 80, this could not be accepted, since the decision ignored R v C & E Commrs, ex parte Kay & Co Ltd VAT[1997] BVC 128 in which Keene J rejected the argument put forward by Customs on the meaning of VAT, pointing out that the words "paid an amount to the commissioners" in Value Added Tax Act 1994 section 80 subsec-or-para (1)s. 80(1) were not apt to describe the payment of an amount to a person's supplier. This afforded persuasive authority for view that repayment claims were not to be measured byValue Added Tax Act 1994 section 80s. 80 unless they related to output tax improperly collected and paid over to Customs.

4. Although there was an agreement between the parties for corrections of errors which should have been taken into account, that would only affect the accounting period in which it could have been utilised. Nevertheless, it should have been taken into account.

5. The appellant's argument that the position of the bank as a "repayment trader", as distinct form the members of a VAT group, could not be accepted, since all supplies by and to a group are treated as made by and to the representative member and the tribunal could only look at the position of the appellant group as a whole.

6. The tribunal did not accept the appellant's argument that there was no express recognition in UK primary or secondary legislation of an enforceable Community law right undereu-directive 77/388 article 17 article 18art. 17 and 18 of Directive 77/388, the sixth VAT directive, to make a belated claim.


[The tribunal set out the facts summarised above and continued as follows.]

Grounds of appeal and response thereto

The appellant's four intimated contentions were:

  1. (2) The disputed tax is input tax wholly attributable to taxable supplies of retailer terminals, which the Appellant is entitled to recover in full under Value Added Tax Act 1994 section 26 subsec-or-para (2)s. 26(2)(a) VATA and eu-directive 77/388 article 17(2)Article 17(2)(a) of the Sixth VAT directive.

  2. (3) The disputed tax was originally unclaimed as a result of an innocent error which the Appellant is entitled to have corrected pursuant to VATA, the Directive and the SI 1995/2518VAT Regulations 1995.

  3. (4) The capping legislation relied on by the Respondents is inapplicable to a claim for input tax underclaimed in error.

  4. (5) Refusal of the Appellant's claim by the Respondents is unlawful and ultra vires and, moreover, conflicts with the Respondents' statements of their policy in inter alia C & E Business Brief...

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