Birmingham Road Motors & Others v Revenue & Customs (VALUE ADDED TAX - claims for repayment of overpaid output tax) [2020] UKFTT 245 (TC)

FTT-Tax
Birmingham Road Motors & Others v Revenue & Customs (VALUE ADDED TAX - claims for repayment of overpaid output tax)
[2020] UKFTT 245 (TC) · 2020-03-20
[30]Section 80(6) makes provision for claims to be made in such form and manner as regulations may provide. The relevant regulation is regulation 37 Value Added Tax Regulations 1995 which provides as follows:
“37. A claim under section 80 of the Act shall be made in writing to the Commissioners and shall, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.” 31. The decision of Mr David Demack sitting in the VAT Tribunal in University of Liverpool v HM Customs & Excise (2000) Decision 16769 is generally recognised as describing when a claim is treated as completed or closed. Essentially, a claim is completed where it has been paid in full. If it has not been paid in full then it is treated as completed where the appeal process against a decision refusing the claim in whole or in part has been exhausted, including time limits for making an appeal, or if there has been some compromise during the appeal process. 32. The issue as to what amounts to a claim and when it may be amended was considered by Roth J in the Upper Tribunal in Reed Employment Limited v HM Revenue & Customs [2013] UKUT 109 (TCC) where he stated as follows: “30. There is no statutory definition of “claim” for the purpose of s. 80 that would provide a basis for distinguishing an amendment to an existing claim from a new claim. Nor is there any authority on this question, save for two VAT Tribunal decisions holding that once a claim has been paid, any further demand cannot constitute an amendment to that claim. This was accepted by Reed in this case, and thus the 2009 Claim cannot be regarded as an amendment to the first or second repayment claims. 31. In those circumstances, I consider that “claim” should here be given its ordinary meaning. In this context, it means a demand for repayment of overpaid tax. It may relate to one accounting period or many, to one particular supply or many, and to a part of the taxpayer’s business or the whole of its business. There is no reason, in my view, why any of these cannot constitute a self-standing claim. 32. The FTT approached the question of whether a further demand is an amendment to an existing claim by adopting the test of whether it was shown to be “in essence as one with an earlier claim”: para 110. In my judgment, there is nothing wrong with this test, but I am not sure it advances the matter significantly, and I do not think it is appropriate to add a gloss to the statutory wording. The FTT proceeded to hold as follows: ‘111. That test, in our view, will be satisfied only if the later claim arises out of the same subject matter as the original claim, without extension to facts and circumstances that fall outside the contemplation of the earlier claim. Without deciding matters outside of this appeal, we consider, for example, that this would generally include cases where a particular computation was not made at the time of the original claim, but the subject matter of the claim was sufficiently identified for such a calculation made subsequently to be related back to the original claim. Simple calculation errors would similarly be included. It should also cover, we think, cases where particular items within the category of the subject matter of the original claim are unknown or not fully identified at the time of the original claim, and would but for that fact have been included in the original claim, but only subsequently come to light.’ 33. If subsequent to the submission of a claim, the taxpayer sends in the correction of a mistake, whether that be an arithmetical error or through the omission of some supplies that were clearly intended to be included, then I consider that would clearly not be a new claim but an amendment. Further, if the taxpayer making a claim says that he is not yet able to calculate the full figures and gather all the documentation as required by reg 37, but is in the course of doing so and will provide such further details as soon as possible, such further submission would not constitute a new claim but fall within the scope of the existing claim. Thus I consider that what is an amendment is very much a question of fact and degree, judged by the particular circumstances. I therefore respectfully agree with the test set out by the FTT in the first sentence of para 111. However, of the examples given in that paragraph, I would not wish to approve in the abstract the final example: that would be for consideration on the particular facts of the case should it arise.” 33. Further consideration to this issue was given by Warren J and Judge Bishopp in HM Revenue & Customs v Vodafone Group Services Limited [2016] UKUT 89 (TCC) where they stated: “47. In our view it is necessary to begin by identifying what are the elements of a claim. It is, as Roth J said in Reed Employment at [31] “a demand for repayment of overpaid tax”
. This is a succinct description of what s 80(1) and (2) provide. As we see it, the focus of s 80(1) is on an amount of output tax which has been brought into account but which was not due, and thus the focus is also on the supplies relevant to that amount. Where a taxpayer has brought into account an amount which was not due as output tax, HMRC are liable to credit him with that amount, that is to say the amount of output tax. When a taxpayer brings into account an amount of output tax, he clearly does so in relation to particular identified supplies. To take a very simple example, suppose he makes two supplies, supply A for a consideration giving rise to VAT of £X and supply B for a consideration giving rise to VAT of £Y. He then accounts for VAT of £(X+Y). He has brought into account £X as output tax in relation to supply A and £Y as output tax in relation to supply B. If it transpires that the £X was not output tax due, that is because it was not output tax due in relation to supply A. … 51. In our view, the claim is not simply for a sum of money in abstract. Rather, it is for the amount which the taxpayer asserts has been brought into account as output tax that was not output tax due. HMRC’s liability is not simply for a sum of money; rather, it is for a sum of money equal to the amount of output tax accounted for which was not output tax due. The taxpayer’s claim under section 80(2) is likewise not, we consider, simply for a sum of money, but is for a sum or money related to particular transactions in respect of which output tax has been accounted for. In the example, the taxpayer might make a claim for £X but that claim would need to relate to the transactions in relation to which the taxpayer contends output tax was not in fact due. It is not possible, in our view, for the taxpayer to rely on that claim as including a claim in relation to the £Y (albeit that the claim might be restricted in value to the equivalent of £X) which was accounted for as output tax in relation to entirely different transactions.” 34. It is clear from the decision of the Court of Appeal in Bratt Auto Services Limited v HM Revenue & Customs [2018] EWCA Civ 1106 that a claim in a single document relating to different accounting periods are properly treated as several claims in relation to each accounting period rather than a single claim. Floyd LJ stated as follows at [27]:[27]“27. I agree with Roth J that the formal requirements of a claim are those contained in regulation 37. However, as I have explained, regulation 37 and section 80 have to be read together so as to give "claim" and "amount" a consistent meaning throughout. A claim under section 80 is not any demand for repayment of overpaid tax, but is a demand for repayment of overpaid output tax for a prescribed accounting period which is not output tax due. Thus I would not agree that a claim under section 80 "may relate to one accounting period or many". A taxpayer may, in the same letter, raise a number of different claims, each by reference to an accounting period, but multiple such claims in the same letter are not, in my judgment, correctly referred to as a single claim under section 80.”35. Most recently, the FTT (Judge Hellier) has considered the question in Ballards of Finchley (see above), which may have prompted the appellants to raise the issue in the email correspondence referred to above. That case also concerned Elida Claims and Italian Republic Claims for repayment of output tax by a motor trader.36. The first issue in Ballards was whether there was one claim for repayment, or many. The trader had made “claims” pursuant to Elida Gibbs and Italian Republic for the period 1973 to 1999. The facts bear considerable similarity to the present facts, and involved an application by Ballards to amend to increase the Italian Republic claim, over and above that which had been originally claimed and refunded. HMRC contended that Ballards had made multiple claims in the form of Elida Claims and Italian Republic Claims for each accounting period. Applying Bratt Auto Services, the FTT held that there was a separate claim for each accounting period encompassing the amount of repayment sought pursuant to both Elida Gibbs and Italian Republic. It addressed the issue as follows:
“19. That leaves the question as to whether the letter should be treated as conveying separate claims for the margin and bonus element in each period. 20. Floyd LJ's remarks do not address this question. There is some help in the legislation, which calls attention to the amount of a claim. Section 80(2) provides that HMRC shall be liable to credit or repay “an amount under the section on a claim being made for that purpose”; subsection (6) requires a claim to be in writing and to comply with regulations, and regulation 37 of the VAT regulations requires the claim to state “the amount of the claim and the method by which that amount was calculated. 21. It seems to me that whether a document comprises one or more than one claim in relation to a VAT period is a matter of the construction of that document in the light of the requirement that any claim must state its amount.” 37. I respectfully agree with the FTT’s analysis of the question. In particular, whether there is a single claim or multiple claims in relation to an accounting period is a matter of construing the document(s) said to make up the claim. 38. The FTT went on to consider the question of whether the claims had been met, settled or compromised. It stated as follows: “33. So far as concerns payment in full this approach derives from the acceptance in Liverpool that a "claim" is for an amount due or (per Roth J in Reed at [31]) that it is a “ demand for repayment of overpaid tax”
Those definitions of "claim" mean that if the amount claimed is paid, there is no longer a claim. Now, the tribunal’s jurisdiction to hear an appeal against the refusal of a claim is given by section 83(1)(t) VATA which speaks of any "claim to the repayment of any amount under section 80". Thus the jurisdiction of the tribunal vanishes with the disappearance of the claim. As a result, when a claim has been paid in full the tribunal has no jurisdiction to address an application to amend the grounds of appeal since it no longer has any jurisdiction to hear the appeal. 34. In the quoted words in paragraph 31(3) above, Judge Demack speaks of a claim being “compromised”. It seems to me that this word must be construed as limited to the situation where there is agreement not to pursue a claim - for only then can it fairly be said that nothing is demanded or said to be due. However, when there is such a compromise it seems to me that the reasons and conclusions in the preceding paragraph apply.” 39. The FTT went on to find on the facts that certain of the claims for certain periods had been met in full and could not be amended, whilst claims for other periods remained outstanding and could be amended. In the event, however, permission to amend was not granted because the FTT considered that the amended grounds would have no prospect of success. That is not a matter which was argued before me. Discussion 40. HMRC’s objection to the Application is put on the basis that BRM’s claims have been met in full, or met in part and the time for appealing has expired. Those claims are therefore now closed and cannot be amended. 41. Mr Puzey on behalf of HMRC submitted as follows in relation to BRM: (1) HMRC had clearly accepted BRM’s Italian Republic Claim in their decision letter dated 21 October 2010, subject only to a Nordania Adjustment. The claim was accepted for the whole period, 1973 to 1996. The only ground of appeal in BRM’s appeal relevant to the Italian Republic Claim was in relation to the Nordania Adjustment. The other grounds either related to the other appellants (grounds 2 and 4), or related to the Elida Gibbs Claim (ground 3). (2) There had been no Nordania Adjustment in relation to BRM for the period 1987 to 1992 because any adjustment would have fallen within the de minimis exception. In any event, the appellants had agreed the Nordania Adjustments in Mr Montgomery’s email dated 24 October 2018. (3) Mount is in the same position as BRM. (4) Kendrick never made an Italian Republic Claim on its own behalf. It made an Elida Claim for the period 1 January 1983 to 30 September 1996. HMRC accepted that claim for the period 1983 to 1988 and a repayment of £5,352 was made. The claim for 1989 to 1996 was rejected. The only claims which could be open therefore are from 1988 to 1992. 42. The appellants do not dispute this analysis, and I accept Mr Puzey’s submissions. 43. The issues which arise on the Application were debated in email correspondence between Mr Jarvis and Mr Montgomery in 2018 and 2019. Mr Jarvis gave evidence during the course of the Application. It is fair to say that the issues debated and the parties’ positions have varied over time. During the course of the hearing Mr Brown helpfully confirmed that the appellants’ case on the Application is simply that because the appellants’ Elida Claims are still open, amendments can be made to the Italian Republic Claims, or as I understand it in the case of Kendrick to introduce an Italian Republic Claim. As previously stated, the appellants seek to amend those claims for the period 1987 to 1992. 44. The issue I must resolve, therefore is whether the appellants’ claims for accounting periods between 1987 to 1992 comprised single claims covering both Elida Gibbs and Italian Republic, or whether there were separate claims for Elida Gibbs and Italian Republic. In Ballards of Finchley, Judge Hellier held that the appellant in that case had made single claims, but that was on the particular facts of that case. I was not invited to read across his conclusion into the present application. 45. Mr Brown in support of the appellants’ case submitted as follows: (1) The Elida Claims and the Italian Republic Claims are both claims for repayment of output tax and in each accounting period should be treated as a single claim. (2) In the alternative, the Elida Claims and Italian Republic Claims both arise out of the same supply chain and should be treated as different aspects of the same issue. 46. As I have said above, the question of whether there is a single claim for repayment of output tax for each accounting period, or multiple claims for each accounting period is a matter of construction. Kendrick’s claim on behalf of all the appellants dated 24 February 2009 stated as follows:
“We are submitting a claim for the VAT overpaid for the period 1 April 1973 to 4 December 1996 based on the decision in Michael Fleming [a case relating to time limits]… This claim covers the years 1973 - 1996 totals £356,655.38 ... … Please treat this letter as a claim for the VAT overpaid (the principal amount)…” 47. There were four schedules annexed to the letter. The first contained a table headed “Margin claim per period”
. It identified a figure claimed for each accounting period covered by the claim and a total of £125,612.34. The second contained a table headed “Bonus claim per period”. Again, it identified a figure claimed for each accounting period covered by the claim and a total of £231,043.03. The first schedule also included a summary of claim as follows: “Summary of claim Italian Margin Claim 125,612.34 Elida Bonus Claim 231,043.03 Total 356,655.38” 48. The other two schedules gave breakdowns of the “margin claim” of £147,987 and the “bonus claim” of £231,043 by reference to each business for each year, as opposed to each accounting period. 49. Mr Brown points out that the letter and the accompanying schedules refer to a “claim” in the singular. However, that cannot be right because the letter covered a large number of separate accounting periods. The letter therefore comprised a number of separate claims. The question is whether, for each period there were separate claims comprising the Elida Claim and the Italian Republic Claim, or a single claim covering both. 50. It seems to me that the fact the two types of claim are separately identified in each accounting period is an indicator that separate claims were being made. A separate figure is given for each type of claim and each accounting period on separate pages. Further, the two types of claim are very different and based on different errors and supplies. One sought to recover output tax accounted for on supplies by the appellants to manufacturers in relation to bonuses paid on demonstrators purchased by the appellants. The other sought to recover output tax accounted for on supplies by the appellants to customers purchasing demonstrators. I acknowledge that the first schedule provides a summary of the claim and identifies a total amount. However, the schedules and indeed the summary clearly separate the “Italian Margin Claim” and the “Elida Bonus Claim”. 51. I am satisfied that Kendrick’s original letter of claim dated 24 February 2009 comprised two separate claims for each accounting period. BRM’s letter of claim dated 4 March 2009 simply incorporated Kendrick’s letter of claim and for the same reasons it comprised two separate claims for each accounting period. 52. The appellants’ alternative argument is that the Elida Claims and the Italian Republic Claims are linked and part of the same issue and therefore the same claim. As I understand it, the appellants say that there would have been no Elida Claim but for the Italian Republic decision. That is because the transaction which gives rise to the Elida Claim is the sale of a demonstrator by a manufacturer to the dealer, either directly or through a finance house. That transaction is a necessary precursor to a subsequent sale of the same vehicle by the dealer to the final consumer, which gives rise to the Italian Republic Claim. On the sale to the final consumer the dealer incorrectly accounted for output tax on the margin, which under HMRC’s original practice did not give credit for the bonus payment received from the manufacturer. If the Italian Republic case had never happened, the VAT overpaid on the bonus payment would have been cancelled out by an additional VAT liability under the margin scheme. In other words, the VAT overpayment all arises from the decision in Italian Republic. The point is illustrated by the annexes to this decision which were in evidence before me. Using the figures in the annexes it can be seen that the overpayment of £440 is the same even if there had been no Elida Gibbs error. 53. I accept that overall there would have been no VAT overpayment if there was a correction for the Elida Gibbs error but no correction for the Italian Republic error. However, I do not accept that affects the analysis as to whether there is one claim or two. The purchase transaction from the manufacturer is a completely separate supply to the sale transaction to the final consumer. VAT is applied to each transaction independently of the other. It is likely that the transactions will occur in separate accounting periods and there could be a long period of time between the two transactions. Further, there is no evidence before me from which I can be satisfied that every purchase transaction involving an Elida Claim has an associated sale transaction involving an Italian Republic Claim, or vice versa. Mr Jarvis did not accept that was the case. 54. Overall, I am satisfied therefore that the appellants’ Italian Republic Claims were separate from their Elida Claims. That is consistent with the focus being on the supplies relevant to the amount be reclaimed, as set out by the Upper Tribunal in Vodafone Group Services Limited. The Italian Republic Claims have previously been accepted by the appellants and it is common ground that in those circumstances the appellants cannot amend their Italian Republic Claims. Conclusion 55. For the reasons given above, I consider that the appellants’ Italian Republic Claims for the period 1987 to 1992 are no longer open and they are not entitled to amend those claims. In the circumstances the Application is refused. Right to apply for permission to appeal 56. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JONATHAN CANNAN TRIBUNAL JUDGE Release date: 15 May 2020 Annex 1 Annex 2