“Having determined that in your case the bonuses were paid by manufacturers solely for you buying a certain number of their vehicles, I accepted that they should be treated as discounts reducing the value of the supply of the car. However, as I explained in my letter of18 March 1998 , I must consider unjust enrichment before authorising any repaying of tax. My HQ’s have reviewed the position again since I informed you that they were minded to invoke this defence. They have found nothing to alter their initial opinion and I am to confirm that the Commissioners are formally invoking the provisions ofSection 80(3) of the VAT Act 1994 in respect of claims made by voluntary disclosures of 27 and30 October 1997 for VAT periods ending 30/9/94, 31/12/94, 31/3/95 and 30/6/95. In making this defence the Commissioners consider that, whatever leasing method was offered by leasing companies, the basic cost of the car was paramount. If input tax could not be recovered, as was the case up to1 August 1995 , then the price of the car included VAT and this cost affected the calculation of the rental charges. If, however, the value of the car had been less and, therefore, the sticking VAT was less, the lease would have been cheaper for the customer. This is because basic cost components, such as interest, would have been based on a lower value. The effect of your failure to take into account the lower value of the cars was that you charged your customers more. Consequently, any refund of VAT would unjustly enrich you as you have already recovered the sticking VAT from your customers in the cost of the lease, and you have not undertaken to pass the benefit of the refund on to your customers. We believe that further proof that you would be unjustly enriched is provided by the wide publicity in the car press about the August 1995leasing charges. It is clear from this that leasing cars would be cheaper because of the absence of sticking VAT. The implication being that under the old rules any reduction in the value of sticking VAT would have been reflected in the leasing cost of the car the benefit of which would accrue to the customer. I would point out that whilst my HQ’s are convinced by the above argument they are always willing to consider any counter view you wish to put forward. They note that in all the correspondence on this matter you have not seriously sought to challenge the defence of unjust enrichment which may imply, they deduce, that you accept its validity. No doubt you will wish to comment in this respect. With regard to the concerns you have raised about the treatment of your claim as compared to your competitors, I am unfortunately not able to report on the final outcome of enquiries currently being conducted by my HQ’s office. I can however, reassure you that the issue is being actively pursued and once the exact position is known, hopefully in the next few weeks, I will advise you further. I can confirm at this stage that should a repayment have been made, in circumstances which are on all fours with your case, then the Commissioners would have to consider their powers to correct the situation. As I have mentioned above, we would of course be prepared to consider any further comment which you may wish to make if you do indeed wish to challenge the defence of unjust enrichment. However, in the absence of any request for reconsideration, you would have 30 days from the date of this letter to appeal to the VAT Tribunal.”
“I have fully considered the facts of this case and the process applied to your and similar claims. As found by the Adjudicator, the application of the unjust enrichment provisions to your claims was correct and your company was not singled out for special treatment. However, I do accept that there were other Elida Gibbs VAT claims from the car leasing sector which were repaid unconditionally when they should have been made subject to, and possibly rejected under, the unjust enrichment provisions. I am somewhat cautious on the rejection point because the unjust enrichment provisions can bite differently on what appear to be very similar cases. A lot hinges on the fine detail of contractual relationships and pricing policy. Nevertheless, whatever the outcome would have been, our failure to consider unjust enrichment in appropriate cases is regrettable. Consistency of treatment is an important aim for us and we are re-examining our procedures to identify improvements that can be made. In the administration of a complicated tax, however, I fear it is inevitable that some instances will arise where different treatment is incorrectly applied to taxpayers in similar circumstances to one of the taxpayers’ disadvantage. We seek to minimise these occurrences and are always prepared, as here, to investigate and reconsider individual cases when they arise. As the Adjudicator recently advised you, in this particular case I did not find that the failings by this Department were such as to justify concessionary treatment and hence concluded that the original decision to refuse these claims must stand.”
“(1) Where a person has (whether before or after commencement of this Act) paid an amount to the Commissioners by way of VAT which was not VAT due to them, they shall be liable to repay the amount to him.” (2) The Commissioners shall only be liable to repay an amount under this section on a claim, being made for the purpose. (3) It shall be a defence, in relation to a claim under this section, that repayment of an amount would unjustly enrich the claimant. (3A) Subsection (3B) below applies for the purposes of subsection (3) above where- (a) there is an amount paid by way of VAT which (apart from subsection (3) above) would fall to be repaid under this section to any person (‘the taxpayer’), and (b) the whole or a part of the cost of the payment of that amount to the Commissioners has, for practical purposes, been borne by a person other than the taxpayer. (3B) Where, in a case to which this subsection applies, loss or damage has been or may be incurred by the taxpayer as a result of mistaken assumptions made in his case about the operation of any VAT provisions, that loss or damage shall be disregarded, except to the extent of the quantified amount, in the making of any determination (a) of whether or to what extent the repayment of an amount to the taxpayer would enrich him; or (b) of whether or to what extent any enrichment of the taxpayer would be unjust. (3C) In subsection (3B) above: ‘the quantified amount’ means the amount (if any) which is shown by the taxpayer to constitute the amount that would appropriately compensate him for loss or damage shown by him to have resulted, for any business carried on by him, from the making of the mistaken assumptions; and ‘VAT provisions’ means the provisions of– (a) any enactment, subordinate legislation or Community legislation (whether or not still in force) which relates to VAT or to any matter connected with VAT; or (b) any notice published by the Commissioners under or for the purposes of any such enactment or subordinate legislation.” … (7) Except as provided by this section the Commissioners shall not be liable to repay an amount paid to them by way of VAT by virtue of the fact that it was not VAT due to them.” (a) there is an amount paid by way of VAT which (apart from subsection (3) above) would fall to be repaid under this section to any person (‘the taxpayer’), and (b) the whole or a part of the cost of the payment of that amount to the Commissioners has, for practical purposes, been borne by a person other than the taxpayer. (a) of whether or to what extent the repayment of an amount to the taxpayer would enrich him; or (b) of whether or to what extent any enrichment of the taxpayer would be unjust. (a) any enactment, subordinate legislation or Community legislation (whether or not still in force) which relates to VAT or to any matter connected with VAT; or (b) any notice published by the Commissioners under or for the purposes of any such enactment or subordinate legislation.”
“[25] In the absence of Community rules concerning the refunding of national charges which have been unlawfully levied, it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which subjects derive from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature and that under no circumstances may they be so adapted as to make it impossible in practice to exercise the rights which the national courts are bound to protect.”
“[26] It should be specified in this connexion that the protection of rights guaranteed in the matter by Community law does not require an order for the recovery of charges improperly made to be granted in conditions which would involve the unjust enrichment of those entitled. There is nothing therefore, from the point of view of Community law, to prevent national courts from taking account in accordance with their national law of the fact that it has been possible for charges unduly levied to be incorporated in the prices of the undertaking liable for the charge and to be passed on to the purchasers. It is equally compatible with the principles of Community law for courts before which claims for recovery of repayments are brought to take into consideration, in accordance with their national law, the damage which an importer may have suffered because the effect of the discriminatory or protective tax provisions was to restrict the volume of imports from other Member States.”
“In my judgment the tribunal correctly stated the proper approach to the burden of proof ([1997] V&DR 85 at 91, para 10). ‘We start by reviewing the evidence adduced by the Commissioners to determine whether they have raised a prima facie case of unjust enrichment i.e. a case which, in the absence of any evidence to the contrary, would satisfy us that repayment would unjustly enrich Marks & Spencer. If the Commissioners have failed to satisfy us of that, we can dismiss the defence. But if the Commissioners have satisfied us that there is a prima facie case of unjust enrichment, we go on and examine the evidence presented by Marks & Spencer who will necessarily have the detailed facts and figures. With all the facts and figures placed before us we revisit the issue and once again ask whether “on the evidence as a whole” the Commissioners have satisfied us of the defence.’” ‘We start by reviewing the evidence adduced by the Commissioners to determine whether they have raised a prima facie case of unjust enrichment i.e. a case which, in the absence of any evidence to the contrary, would satisfy us that repayment would unjustly enrich Marks & Spencer. If the Commissioners have failed to satisfy us of that, we can dismiss the defence. But if the Commissioners have satisfied us that there is a prima facie case of unjust enrichment, we go on and examine the evidence presented by Marks & Spencer who will necessarily have the detailed facts and figures. With all the facts and figures placed before us we revisit the issue and once again ask whether “on the evidence as a whole” the Commissioners have satisfied us of the defence.’”
“I am concerned at the reference by the tribunal ([1997] V&DR 85 at 91, para 10) to ‘Marks and Spencer who will necessarily have the detailed facts and figures [emphasis added].’ I shall go on, when considering the decision in more detail, to see whether that led the tribunal into error in consideration of all the evidence. But I observe, at this stage, that the tribunal ought not to place reliance upon any failure to produce detailed facts and figures when that failure will normally be the fault of the taxing authority which levied a charge to which it was not entitled. A tribunal should only conclude that the defence of unjust enrichment is made out where the evidence satisfied it that a repayment will cause unjust enrichment.”
“[58] On the one hand there must be no obligation on the claimant to prove that he has not passed the burden of the tax on to a third party and no presumption that he has done so simply because his retail price was necessarily deemed to be inclusive of tax, regardless of any other circumstances. [59]On the other hand it is clear that, where a self-assessed tax is concerned, the tax authorities cannot be expected to prove that the burden has been passed on without the taxable persons cooperation and access to such relevant records as he may have kept. [60] In that context, it is in my view desirable to clarify the case-law by pointing out that, whilst Community law precludes any presumption of unjust enrichment to be refuted by the claimant, it does not preclude the possibility of drawing reasonable inferences from existing evidence. Without such a possibility, the balance might be tilted so far in favour of the claimant as to render the justified aim of preventing unjust enrichment in practice impossible to achieve. It must be possible for the deciding body to take all available relevant evidence into consideration and reach a fair decision taking full account of whatever likelihood there may be that the claimant bore any part of the burden of the tax or suffered any economic loss as a result of its imposition.”
“in view of our decision [on unfair treatment] it is not necessary for us to consider unjust enrichment but, in case this appeal should go further, we state that unjust enrichment has not been established for the reasons given in paragraph 106 above.”
“There is some common ground on the legal analysis of unjust enrichment. Where the submissions diverge appears by contrasting paragraphs 15 and 16 of the Respondents’ Skeleton with paragraphs 23 and 24 of the Appellant’s submissions. The Respondents’ conclusions as to application of the defence are too narrow. The basic questions are whether a repayment would enrich the claimant and whether that would be unjust. Community law does not permit an irrebuttable presumption merely because the undue tax has been passed on. It is still necessary to consider the basic questions. This case is not the simple scenario as in M&SHC where VAT was wrongly charged on teacakes and passed on in full to the final consumer. It is more complex. The undue “VAT” on the Manufacturers’ Bonuses was not borne by the manufacturers. They obtained a deduction. It was in practice borne by the Appellant since it was a cost component of purchasing the cars and deduction was blocked. The Respondents have not shown this VAT was expressly passed on: the onward supply was not of goods but of services. The undue “VAT” was only one factor in the lease pricing and some element of the VAT suffered on purchasing the cars, the Appellant would have to invoice for the VAT inclusive amount of the bonus, plus VAT: see Worked Example attached (Appendix 3). On the facts the Respondents have not discharged the burden of proof of showing unjust enrichment.”
“Subject to s.84, an appeal shall lie to a tribunal with respect to any of the following matters - … (t) a claim for the repayment of an amount under s.80 …”
“Does our jurisdiction in any way extend to controlling the manner in which the Commissioners have administered the law? Here again, I go back to sections 83 and 84. The VAT and Duties Tribunals have been created by statute and theft powers are conferred by it. We have no supervisory jurisdiction, so far as claims and refusals and refusals of claims under section 80 are concerned. Our jurisdiction is appellate. It is limited to determining whether decisions of the Commissioners to refuse claims are correct in law. ... However, no provision of the 1994 Act enables this tribunal to declare ineffective the manner in which the Commissioners have applied the provisions of section 80.”
“However in so far as the complaint is not focused upon the consequences of the statute but rather upon the conduct of the Commissioners then it is clear that it has no jurisdiction. Its jurisdiction is limited to decisions of the Commissioners and it has no jurisdiction in relation to supervision of their conduct.”
“Where an appeal is against a decision of the Commissioners which depended upon a prior decision taken by them in relation to the appellant, the fact that the prior decision is not within section 83 shall not prevent the tribunal from allowing the appeal on the ground that it would have allowed an appeal against the prior decision.”
“[10] But the passages to which I have made reference are a strong reminder that the threshold of unfairness amounting to an abuse of power is a high one, and that the court must be careful not to interfere simply because a decision can be justifiably subject to some criticism.”
“Identical in law argument [15] The basis of this argument is that the court can now see, with the benefit of the decision of the tribunal, that BSkyB and the two cable companies ought to have been treated similarly in 1998. Accordingly, it is said that the commissioners acted unfairly in treating them differently. [16] In my judgment this way of putting the case is wrong in principle and is a recipe for chaos in practice. Judicial review is about testing the legality of administrative action; save in exceptional cases, such as if jurisdiction is in issue, that can only properly be judged in the light of the factors which were known or ought to have been known by the administrator when the decision was taken. Of course, it may be necessary for an administrator to reconsider the decision if new facts emerge, but the legality of his action is not to be judged by material of which he was not, and could not be expected to have been, aware. Mr Pannick’s argument amounts to saying that a body will be at risk of acting unfairly if it makes a rational and defensible decision as to the effect of the law in a particular situation and a court subsequently holds that the legal analysis was wrong. In my view that cannot be right. The argument equates a lack of fairness with an erroneous analysis of the law, at least where that mistaken analysis has led to the different treatment of persons in a legally identical position. In my judgment that expands the concept of fairness well beyond its established or legitimate limit. [17] Furthermore, if this argument were right, the practical consequences would be severe indeed. Whenever a VAT tribunal rules that a company is subject to VAT on something which was formerly zero-rated then other parties who have been paying VAT for years in respect of the same service could on Mr Pannick’s argument claim a rebate on the grounds that in retrospect it could be seen that they had been treated less fairly than the other party. The commissioners would never know when they may be subject to an obligation to repay taxes which they had originally obtained perfectly lawfully. No doubt there would be an overwhelming temptation for the officers in any situation of uncertainty to levy a VAT charge in case by failing to do so they were creating the risk that they might subsequently be shown to be wrong with the consequences that others, currently paying the tax, would then be able to reclaim the tax paid on the grounds that they had been the subject of unequal. and therefore unfair treatment. No sensible system of tax administration could operate in such a state of uncertainty.”
“The Respondents have breached the Community law principles of effectiveness and equality of treatment. This is quite clear from both letters written to the Appellant by Mike Eland. In the letter of23 August 2001 he says ‘... I fear it is inevitable that some instances will arise where different treatment is incorrectly applied to tax payers in similar circumstances to one of the tax payer’s disadvantage. We seek to minimize these occurrences and are always prepared, as here, to investigate and reconsider individual cases when they arise ... In this particular case I do not find that the failures by this Department were such as to justify concessionary treatment and hence concluded that the original decision to refuse these claims must stand.’ If different treatment was [sic] incorrectly applied to tax payers in similar circumstances, we would have thought that the correct response might be to reverse the decision in cases where the treatment was incorrect rather than speak of ‘concessionary treatment’. As Mr Conlon pointed out, the Appellant was in fact impoverished, rather than enriched, by the refusal of its claim because other identical claimants had been, and continued to be, repaid. In this case, the losses incurred greatly exceeded the amount of the claim, being put by Mr Waghorn at over£5.8m . If, as Mr Conlon said, and as was likely, the Appellant’s competitors also suffered losses, the repayments made to those competitors by the Respondents would have created a cushion against the full extent of their losses. As a result of the Respondents’ decisions this is a cushion denied to the Appellant. This is a clear breach of the principle of equality of treatment.”
Showing the 50 most senior of 55.