University of Sussex v Commissioners of Customs and Excise

JurisdictionUK Non-devolved
Judgment Date10 October 2001
Date10 October 2001
CourtValue Added Tax Tribunal
University of Sussex
and
Customs and Excise Commissioners

Neuberger J.

Chancery Division.

Value added tax - Input tax - Repayment - Recovery of overpaid tax - Claim for input tax - Three-year time-limit for repayment by commissioners of tax paid but not due - Whether unclaimed input tax was VAT paid but not due - Value Added Tax Act 1994, Value Added Tax Act 1994 section 25 section 80ss. 25, 80 - Value Added Tax Regulations 1995 (SI 1995/2518),SI 1995/2518 regulation 29reg. 29.

This was an appeal by the taxpayer against a decision of a VAT and Duties Tribunal (No. 16,656; [2001] BVC 2003)dismissing the taxpayer's appeal against the Customs' refusal of its claim for repayment of input tax unclaimed on supplies made during a 23 -year period from 1973 to 1996.

From 1973 when VAT was introduced into the UK, the taxpayer had failed to claim certain amounts of input tax as a credit against the output tax it had paid. In 1996 the taxpayer sought to claim a repayment for the previously unclaimed input tax. Customs rejected the claim for all years prior to 1993 on the basis that the claim for those years was barred byValue Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) of the Value Added Tax Act 1994. The VAT tribunal upheld that decision to the extent that the taxpayer's claim related to any period arising more than three years before the claim was made.

The taxpayer appealed to the High Court contending that Value Added Tax Act 1994 section 80s. 80 was only concerned with overpayments of output tax, whereas this case concerned under-claimed input tax. Accordingly, rather than being made pursuant toValue Added Tax Act 1994 section 80s. 80, the claim was made pursuant to SI 1995/2518 regulation 29reg. 29of the Value Added Tax Regulations 1995, and although a limitation period was introduced in reg. 29(1A) by the amendment regulations in 1997, there was no such cap at the time that the claim was made. Customs argued that the claim fell within Value Added Tax Act 1994 section 80 subsec-or-para (1)s. 80(1) on the basis that the taxpayer "paid an amount to the Commissioners by way of VAT which was not VAT due to them". Therefore the three-year cap in Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4)applied.

Held, allowing the taxpayer's appeal:

1. A taxpayer who wished to avoid the consequences of the cap or time-limit in Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) had to establish that his claim was not within Value Added Tax Act 1994 section 80 subsec-or-para (1)s. 80(1) which was dealt with the recovery of overpaid VAT. A claim which would have been a claim for input tax, had it been made timeously, was not converted, simply by being claimed late, into a claim for overpaid VAT. In this case the taxpayer's primary right was to claim input tax in the returns for the periods in respect of which the supplies concerned were respectively actually made. However, its failure to do so did not result, on an analysis of the way in which the relevant legislation was worded, in money having been overpaid by the taxpayer to Customs. Accordingly, the claim did not fall within Value Added Tax Act 1994 section 80s. 80 and the provisions of Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) could not be relied on by Customs. (BICC plc [1998] BVC 2120; [1998] V & DR 224 and Royal Bank of Scotland Group plc [1999] BVC 2240; [1999] V & DR 122 considered.)

2. Customs did not suffer if the input tax was claimed late: they obtained the equivalent of an interest-free loan.eu-directive 77/388 article 18 subsec-or-para 3Article 18(3) of the sixth Council directive (Directive 77/388) ("the sixth directive") permitted the domestic legislature to impose a time-limit on late claims for input tax. The risk the taxpayer took by not claiming the input tax at once was that terms of any indulgence to make late claims accorded by the UK, pursuant to its obligations undereu-directive 77/388 article 18 subsec-or-para 3art. 18(3) of the sixth directive, might defeat any late claim by the taxpayer.

3. The claim was therefore within reg. 29 because it was a claim for deduction of input tax, albeit late. SI 1995/2518 regulation 29Regulation 29(1) represented the gateway through which a repayment trader who had understated his input tax could obtain a payment. Although the wording of SI 1995/2518 regulation 29reg. 29 appeared to give the commissioners a very wide discretion as to whether, and if so when, to admit late claims for input tax, there were in fact no good grounds for refusing the claim which was validly made and should have been accepted as valid by Customs.

The following cases were referred to in the judgment:

BICC plc VAT[1998] BVC 2120; [1998] V & DR 224

BP Supergas Anonimos Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion v Greece VAT(Case C-62/93) [1995] BVC 385; [1995] ECR I-1883

EC Commission v France (Case 50/87) [1988] ECR 4797

Edwards (HMIT) v Bairstow ELRTAX[1956] AC 14; (1956) 36 TC 207

Elida Gibbs Ltd v C & E Commrs VAT(Case C-317/94) [1997] BVC 80; [1996] ECR I-5339

Ideal Tourisme SA v Belgium (Case C-36/99) [2000] ECR I-6049

Italy v EC Commission (Joined Cases C-15/98 and C-105/99) [2000] ECR I-8855

Ministero delle Finanze v IN CO GE 90 Srl (Joined Cases C-10/97 and C-22/97) [1998] ECR I-6307

R v C & E Commrs, ex parte Lunn Poly Ltd UNK[1999] 1 CMLR 1357

Rompelman v Minister van Financiën VAT(Case 268/83) (1985) 2 BVC 200,157; [1985] ECR 655

Royal Bank of Scotland Group plc VAT[1999] BVC 2240; [1999] V & DR 122

Roderick Cordara QC and Paul Key (instructed by KLegal) for the University of Sussex.

Paul Lasok QC and Peter Mantle (instructed by the Solicitors of Customs and Excise) for Customs.

JUDGMENT

Neuberger J: Introduction

1. This is an appeal brought by the University of Sussex ("the university") against a decision of the VAT and Duties Tribunal ("the tribunal") which was released on 26 May 2000 ([2001] BVC 2003). The tribunal dismissed an appeal brought by the university against a decision of the Commissioners of Customs and Exercise ("the commissioners"). The commissioners had rejected a claim ("the claim") brought by the university for input tax. The input tax in question was tax which could have been claimed, but was not claimed by the university by way of credit against its output tax during the whole of the period since value added tax ("VAT") was first introduced in the UK. The tribunal upheld that decision to the extent that the university's claim related to any period arising more than three years before that claim was made.

2. In this judgment, unless the contrary is stated, the following expressions have the following meanings. References to sections are to sections of the Value Added Tax Act 1994 ("the 1994 Act"). The "first directive" is Council Directive 67/227 of 11 April 1967, and "the sixth directive" is Council Directive 77/388 of 17 May 1977. References to articles are to articles of the sixth directive, except that references to art. 87 are to that article of the EC Treaty. Any reference to "the regulations" is to the Value Added Tax Regulations 1995 (SI 1995/2518), and any reference to a regulation is to a regulation therein. The "amendment regulations" are the Value Added Tax (Amendment) Regulations 1997 (SI 1997/1086). The ECJ is the European Court of Justice.

3. The issues raised by this appeal may be summarised as follows, namely:

  1. (2) Is the university's claim within Value Added Tax Act 1994 section 80s. 80 or SI 1995/2518 regulation 29reg. 29?

  2. (3) If the claim is within SI 1995/2518 regulation 29reg. 29:

    1. (a) Is it rightly rejected by the commissioners?

    2. (b) If so, was the rejection contrary to Community law?

(4) If the claim is within Value Added Tax Act 1994 section 80s. 80:

  1. (a) Is, or was the manner of introduction of, Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) contrary to Community law?

  2. (b) Does the consequential difference in time-limits for late claims for input tax between so-called "payment traders" and "repayment traders" amount to unlawful State aid?

The facts

4. The university was incorporated under Royal Charter granted in 1961, and it became registered for VAT on 1 April 1973. It principally makes supplies of education, which are exempt for VAT purposes, but it also makes taxable supplies. On 25 November 1996, the university's accountants lodged the claim, which was for repayment of input tax which had been previously unclaimed over the period 1 April 1973 to 31 July 1996. The commissioners rejected the claim in whole or in part on a number of grounds. The only ground relevant for present purposes was that, in so far as the claim was for input tax for periods arising before 1 May 1993, it was in respect of periods which fall foul of a three-year limitation period or "cap" prescribed by Value Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4).

5. It appears that, during the period between 1973 and 1996, the university took a conscious decision not to deduct certain amounts of input tax in its VAT returns, in respect of the periods for which such deductions fell to be made. That decision was taken, according to the tribunal in an earlier decision released on 29 July 1999, for "what might fairly be described as political reasons".

6. As I have mentioned, on 25 November 1996, the university then submitted the claim, which related to input tax in respect of supplies made during each of the accounting periods from 1 August 1973 to 31 July 1996. The claim is thus effectively based on the fact that, in each of the accounting periods during those 23 years, the university had understated in its VAT returns the amount of input tax which it could then have claimed.

7. The university accepts that its failure to claim input tax for that 23 year period was deliberate, but contends that it was positively encouraged by the government to take that...

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