University Court of the University of Glasgow and Others v Commissioners of Customs and Excise
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 February 2003 |
| Date | 20 February 2003 |
| Docket Number | No 26 |
| Court | Value Added Tax Tribunal |
FIRST DIVISION
Revenue - Value Added Tax - Alternative assessments - Competency - Whether multiple liability to tax - Whether assessment to the Commissioners' best judgment - Value Added Tax Act 1994 (cap 23), secs 73(1), (9), 83, 84(3)1
Section 73(1) of the Value Added Tax Act 1994 empowers the Commissioners of Customs and Excise in certain defined circumstances to assess the amount of VAT due from a taxable person to the best of their judgment. Section 73(9) provides that where an amount has been assessed and notified to any person under subsec (1) it shall, subject to the provisions of the Act as to appeals, be deemed to be an amount of VAT due from him and may be recovered accordingly, unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced. Section 83 provides a right of appeal to a tribunal, subject to sec 84. Section 84(3) provides that such an appeal shall not be entertained unless the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them or, on being satisfied that the appellant would otherwise suffer hardship, the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.
Over various accounting periods arrangements were in place among the appellant and others regarding the purchase, hire and sale of certain assets. Questions arose concerning the VAT liability (if any) of the appellant for supplies made in furtherance of these arrangements. The respondents sent the appellant a letter under the heading 'ASSESSMENTS FOR THE PERIOD 01/98'. The letter explained that the assessments were in the form of a preferred assessment in the sum of £111,377 and an alternative assessment in the sum of £96,255, and set out the legal background to each assessment. The respondents advised that the assessments were mutually exclusive, and that the preferred assessment was the one which should be paid. The respondents enclosed two documents, each headed 'NOTICE OF ASSESSMENT', specifying the sum of tax calculated and interest on the tax, and containing the statement 'You are hereby assessed for VAT and interest as set out above. The reasons behind the assessment are set out in a covering letter.' The appellant challenged the competency of the Commissioners making and notifying separate assessments for VAT on an alternative basis. The VAT and Duties Tribunal held that the procedure was competent. The appellant appealed to the Court of Session and argued that the making of multiple assessments gave rise to multiple liability to tax; tax on each assessment would require to be paid as a precondition of appealing; these difficulties were not cured by the existence of any administrative discretion vested in the Commissioners; there was no proper analogy with alternative assessments in respect of direct taxes; alternative assessments were not made to the best of the Commissioners' judgment and hence wereultra vires; the Commissioners could have incorporated alternative bases within a single assessment.
Held that: (1) where two assessments in different amounts, made and notified contemporaneously, are so made and notified expressly as being in the alternative, they are not independent but interrelated and as such they are mutually exclusive and not exigible in the aggregate, so that the Commissioners would have no right to recover the aggregate amount (pp 363F-364C); (2) 'the amount which the Commissioners have determined to be payable as
VAT' within the meaning of sec 84(3)(a), where both of the alternative assessments have been appealed is not the aggregate amount but the higher of the two amounts, and accordingly the tribunal had jurisdiction to entertain the appeals (p 364D); (3) alternative assessments for VAT provide in appropriate cases a practical and workable machinery for the ultimate recovery of the tax properly due (p 364E-I); and (4) in the present case the use of distinct but alternative assessments was competent, it was within the power of assessment under sec 73(1) and was to the best of the Commissioners' judgment; and appeal refused.THE UNIVERSITY COURT OF THE UNIVERSITY OF GLASGOW appealed to the VAT and Duties Tribunal in respect of notices of assessment issued by the Commissioners of Customs and Excise. The appellant challenged the competency of the procedure adopted by the Commissioners in assessing the University to tax at a hearing on 17 August 2001. By decision dated 23 August 2001 the tribunal (constituted by Mr T G Coutts QC, Chairman, sitting alone) held that the assessments were competent. The appellant appealed to the Court of Session. The Commissioners of Customs and Excise were called as respondents.
Cases referred to:
Bath and West Counties Property Trust Ltd v ThomasWLR [1977] 1 WLR 1423
Bird v Inland Revenue CommissionersELR [1989] 1 AC 300
Bye v CorenUNK [1986] STC 393
City of London Corporation v Commissioners of Customs and Excise 5 February 2002 (unreported)
Commission of The European Communities v Italian Republic Case 145/82, (1983) ECR 711
Courts Plc v Commissioners of Customs and Excise 13 November 2002 (unreported)
Don Pasquale v Customs and Excise CommissionersUNK 1990 STC 556
Grange (S J) Ltd v Customs and Excise CommissionersWLR [1979] 1 WLR 239
Inland Revenue Commissioners v WilkinsonUNK [1992] STC 454
Lord Advocate v McKennaSC 1989 SC 158, 1988 SLT 523 (Outer House)
R v Customs and Excise Commissioners, ex p Kay & Co LtdUNK [1996] STC 1500
R v Freshwell Commissioners, ex p ClarkeTAX [1971] 47 TC 691
Rahman v Commissioners of Customs and ExciseUNK [2002] EWCA Civ 1881
Ridgeons Bulk Ltd v Commissioners of Customs and ExciseUNK [1994] STC 427
Vestey v Commissioners of Inland RevenueELR[1980] AC 1148
The cause called before the First Division comprising the Lord President (Cullen), Lord Marnoch and Lord Hamilton for a hearing on the summar roll on 21 and 22 January 2003.
At advising on 20 February 2003 the opinion of the Court was delivered by Lord Hamilton-
OPINION OF THE COURT - [1] Over various accounting periods arrangements were in place among (1) the appellant, (2) Gilmore Leasing Limited ('GL'), a member of the University VAT Group, and (3) Gilmorehill Leaseco (1996) Ltd ('GL 1996'), not a member of that Group, which involved the purchase, hire and sale of certain assets. Questions have arisen concerning the VAT liability (if any) of the appellant for supplies made in furtherance of these arrangements. The merits of the respondents' claim for tax have not yet been considered by a tribunal. A preliminary question has, however, arisen concerning the competency of the procedure adopted by the respondents in assessing the appellant to tax. Four conjoined appeals were heard by a VAT and duties tribunal (constituted by Mr TG Coutts QC, Chairman, sitting alone), in three of which the issue of competency arose. It is, subject to one additional matter, sufficient for present purposes to summarise the circumstances pertinent to one of these appeals [EDN/01/28], which relates to the assessment period ended January 1998.
[2] On 30 January 2001 an officer of the respondents wrote to the appellant's Director of Finance a letter under the heading 'ASSESSMENTS FOR THE PERIOD 01/98'. The first paragraph of that letter ran:
'1. I enclose assessments for the University for the period 01/98. There are two types of assessment:
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(a) the preferred assessment (based on the disallowance of input tax on the grounds that it is attributable to exempt supplies);
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(b) the alternative assessment (based on the disallowance of input tax on the grounds that there has been an abuse of the law)'.
There followed a narrative of the purchase, hire and sale arrangements. Paragraphs 3 and 4 were in the following terms:
'3. The legal background to the assessments is as follows.
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4. The preferred assessment. This assessment is based on the evidence obtained to date (including the additional information provided at the meeting we had on 19 December 2000) regarding the VAT Group's intended use of the assets in question at the time that they were acquired. In the Commissioners' view, that evidence indicates that the input tax claimed by the VAT Group in respect of these assets is not, as you contend, attributable exclusively to taxable supplies, but rather should be treated as attributable to taxable and exempt supplies and the related input tax recovered only to the extent allowed by your partial exemption method.'
Paragraphs 5, 6 and 7 expanded on the legal reasoning on which the preferred assessment proceeded. Paragraph 8 was in the following terms:
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