“In circumstances where l ) the representative member of a VAT group accounted to HMRC for VAT for a prescribed accounting period and brought into account an amount as output tax that was not output tax due; 2) the company whose trading activities gave rise to that overdeclaration of output tax (“the generating member”) was a member of that VAT group during the relevant prescribed accounting period; 3) that VAT group remains in existence, but the generating member has ceased to be a member of that VAT group; is it the generating member (or a company to which the generating member has assigned any right which it has to claim under s.80 VATA 94 (“Section 80”) which is entitled to make a claim under Section 80 in respect of the overdeclared output tax?”
“(l) Where under sections 43A to 43D any bodies corporate are treated as members of a group, any business carried on by a member of the group shall be treated as carried on by the representative member, and (a) any supply of goods or services by a member of the group to a nother member of the group shall be disregarded: and (b) any [supply which is a supply to which paragraph (a) above does not apply and is a supply] of goods or services by or to a member of the group shall be treated as a supply by or to the representative member: . . . and all members of the group shall be liable jointly and severally for any VAT due from the representative member.”
“(1) Where a person -- (a) has accounted to the Commissioners for VAT for a prescribed accounting period whenever ended, and (b) in doing so has brought into account as output tax an amount that was not output tax due, the Commissioners shall be liable to credit the person with that amount. … (2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose. (2A) Where- (a) as a result of a claim under this section by virtue of subsection (1 ) or (1A) above an amount falls to be credited to a person, and (b) after setting any sums against it under or by virtue of this Act, some or all of that amount remains to his credit, the Commissioners shall be liable to pay (or repay) to him so much of that amount as so remains. . . . (7) Except as provided by this section, the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to t hem.”
“40. … the right to obtain a refund of amounts charged by a member state in breach o f rules of Community law is the consequence and compliment of the rights conferred on individuals by the Community provisions as interpreted by the court (see [authority cited]). 41. While it is true that such a refund may be sought only in the framework of the substantive and procedural conditions laid down by the various relevant national laws, the court has consistently held (see inter alia, [authority cited]) that those conditions and the procedural conditions and rules governing actions at law for protecting the rights which individuals derive from the direct effect of Community law may not be less favourable than those relating to similar, domestic actions nor be framed in a way such as to render virtually impossible the exercise of rights conferred by Community law.”
“I agree with the parties that the FTT fell into error in relation to those matters, and I find the analysis of the FTT in Standard Chartered persuasive in relation to them (and preferable to the approach taken by the FTT in MG Rover ).”
“the right to the recovery of sums unduly paid helps offset the consequences of the duty’s incompatibility with EU law by neutralising the economic burden which that duty has unduly imposed on the operator who, in the final analysis, has actually borne it.”
“200. The purpose of s 43 was to enable companies in common control to be treated for VAT purposes as a single entity. This goes beyond administrative convenience to the point that it can affect the nature of what is supplied (Kingfisher) subject to the normal rules of single and multiple supplies 201. Its purpose is therefore limited in time to when the companies are in common control: its purpose is not fulfilled if companies no longer in common control are yet treated to some extent as still grouped. Moreover if the deeming effect of s. 43(1)(b) does not end when the RWS leaves the VAT group absurd, unjust, and anomalous consequences follow in cases involving VAT overpayments. Allowing the deeming effect to continue after the RWS has left the group uncouples the burden of paying the VAT from the liability to pay it. It leads to a situation where Company X overpays the VAT but Company Y recovers if from HMRC, or Company X underpays VAT but Company Y is primarily liable for the assessment, even though Company X and Y are no longer connected, and (in some cases) may never have been connected. 202. So I conclude that as a matter of UK law, and applying the principles outlined in DCC, the deeming effect of s 43(1)(b) ceases when RWS leaves the group. At that point the RWS (or its new representative member if it joins another VAT group) is able to make (and assign) s 80 and BDR claims for VAT accounted for by the RWS’s erstwhile representative member, and the RWS is primarily liable for VAT underpaid while it was a VAT group member (albeit the companies in the group at the time, including the erstwhile representative member, will retain joint and several liability). 203. That conclusion is consistent with the outcome of the case of Triad, Proto Glazing, Taylor Clark, Thorn plc and Chubb and consistent with the reasoning in those cases in so far as they were based on the limited extent of the deeming provisions of s 43.
“All the Shop Direct case really shows is that the tribunals and Court of Appeal were satisfied that the payment by the representative member to the generating member was not a gift but reflected an obligation owed by the representative member to the generating member.”
“In as much as the services provided for consideration by a company such as SAC to its branch must be deemed, solely from the point of view of VAT, to have been provided to the VAT group, and as that company and that branch cannot be considered to be a single taxable person, it must be concluded that the supply of such services constitutes a taxable transaction, under Article 2(1)(c) of the VAT Directive.”
“77. The San Giorgio principle … is that entitlement to the repayment of charges levied by a Member State in breach of Community law is a consequence of, and an adjunct to, the rights conferred on individuals by the Community provisions preventing such charges. The Member State is therefore in principle required to repay charges levied in breach of Community law (see Societe Comateb v Directeur general des douanes et droits indirects and related references[1997] STC 1006 ).”
“109 . . . We consider that reliance by the [ Taylor Clark FTT] tribunal on a concept of the affairs of individual members of the group being represented by the representative member is wrong in principle. We share the view of the tribunal in Thorn [plc v Customs and Excise Commissioners [1998] V&DR 80], that the role of the representative member is not one of agency. The authorities are in our view clear that the effect of s. 43 VATA 94 is to create the single taxable person envisaged by Article 4(4) of the Sixth Directive, and that the representative member does not represent the individual members of the group, but represents or embodies the single taxable person. 110. Accordingly, a change in composition of the group, whether by a member joining the group, or a member leaving it, can in our view have no effect in itself on the entitlement of a representative member to claim for overpayments of VAT made by the single taxable person during the currency of the group registration. One has to look at the single taxable person as if it were a legal person with its own VAT registration. If, on that analysis, the single taxable person would, if it had legal capacity, be entitled to claim, then that is the entitlement of the representative member for the time being. In consequence… those entitlements that do arise to the single taxable person remain as such, and accordingly it is the representative member of the group that has that entitlement, and not the member leaving the group, even if that member was the generating member. 111. That is the position under s 80 VATA, which looks to the person who has accounted for the tax to HMRC, or who has been assessed. That is apt, in normal circumstances, to relate to the representative member or, exceptionally, to a group member that has been assessed to tax under the joint and several liability provisions in s 43(1). In a continuing group, there is no basis for holding that such a provision of national law does not accord with the principle of effectiveness.”
“112. In our judgment the position is essentially the same in the case of a group that has ceased to exist. The single taxable person fiction ceases to apply, but it ceases to apply for the future only. There is no retrospective unravelling of the effect of the single taxable person fiction; in particular, intra-group supplies continue to be ignored, and supplies made by or to the group during the currency of the group continue to be treated as having been made to or by the representative member. The position of the single taxable person, and consequently of the representative member that is the embodiment of that fiction, is that it has simply ceased to be a taxable person. Although the statutory fiction has ended, its historical effect, as regards the accounting and payment of the tax, endures. Respecting the fiction for the past, the position is no different from the VAT perspective to that of an individual taxable person who has ceased to be such. In such a case, there would be no argument but that the individual would be entitled to make a claim under s 80 for any tax wrongly levied on him while he was a taxable person. The position of the single taxable person is the same. Section 80 gives a right to claim to the person who has accounted for the tax, namely the single taxable person through the representative member for the time being, or to the person who has paid the tax to HMRC by reason of joint and several liability. In ordinary circumstances, therefore, the s 80 right is that of the representative member of the group immediately before the group registration came to an end. That right under national law cannot, as a matter of principle, be regarded as in breach of the principle of effectiveness.”
“113. The position is different, however, if the right of the representative member does not, in given circumstances, provide an effective remedy. This applies both to the case of a continuing group, and one that has ceased to exist. In those circumstances, if it is impossible or excessively difficult for the representative member to obtain reimbursement from the tax authority, so that the burden of the tax on the group has not been economically neutralised, a San Giorgio right will arise in favour of another person. However, such an enquiry does not encompass ascertaining where the burden of the tax has fallen, otherwise than through the operation of the VAT system itself. Questions of internal funding, whether they are general intra group funding arrangements or arrangements for the contribution of a group member’s share of the VAT to the representative member, are not relevant in identifying the person with the right to claim. 114. Such an issue is likely to arise only in a case where either the group has ceased to exist, or a company that was formerly in the group has left in circumstances where a claim by the representative member of the continuing group does not provide an effective remedy. In the former case, the group itself has ceased to be subject to the statutory fiction, and in the latter it is the individual company that has so ceased. In each of those circumstances, that factor in our view dictates that, in determining where the claim should lie, regard should be had to the real transactions that have been undertaken. On that basis, such a right would, in our view, fall on the company that, had the single taxable person fiction not applied, would have been the taxable person in relation to the activity giving rise to the tax.”