“As per the VAT1 your client selected the following VAT stagger: Jan, April, July, Oct. Therefore, the first return (the long return) will be due by7 June 2023 which should cover the VAT from01 November 2018 to30 April 2023 . It is noted that there is ongoing litigation on whether CCML should be VAT registered but going forward HMRC’s expectation is that CCML submits their first return (long return) and pays any VAT owed as normal. If CCML submit the first return and are unable to pay the VAT then a hardship application can be made. If CCML fail to render a return, then a VAT assessment will be raised in accordance. Obviously depending on the outcome of the appeal if in favour of you[r] client then any VAT paid now by CCML will be reversed.”
“83. Appeals (1) Subject to sections 83G and 84, an appeal shall lie to the tribunal with respect to any of the following matters – (a) the registration or cancellation of any person under this Act; (b) the VAT chargeable on the supply of any goods or service or, subject to section 84(9), on the importation of goods.”
“A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9.”
“The grant of any interest in or right over land or of any licence to occupy land ....”
“An Extra-Statutory concession, effective from1 April 1994 , will exempt various mandatory service charges paid by the occupants for residential property from VAT. The charges exempted are for the upkeep of the common areas of caretakers or people performing a similar function connected with the day to day running of that estate of dwellings or blocks of flats, and the general maintenance of the exterior of the block of flats of individual dwellings (e.g. painting and window cleaning) if the residents cannot refuse this. Removal of anomaly Service charges relating to the upkeep of the common areas of dwellings, or the common areas of a domestic dwelling if it is multi-occupied, are exempt from VAT under the general exemption for land, if they are paid by leasehold owners of property under the terms of the lease, or by people renting the property, and these charges are paid to the lessor or the ground landlord. Previously charges paid by freehold owners of domestic property, and by anyone for services which are not supplied by or under the direction of the lessor or ground landlord, have been taxable. This was because they could not be consideration for any supply of land. This has led to an anomaly for the occupants of residential property, since the liability of the service charges they pay towards the upkeep of the common area does not depend on the services provided, but instead on the tenure of their residence and on the status of the supplier. The new concession means that the liability of the service charge will no longer depend upon the tenure of the residence or on the status of the supplier. What will be important is whether each resident is obliged to accept the service because it is supplied to the estate of buildings or blocks of flats as a whole. Optional services provided personally to a resident, such as carpet cleaning and shopping continue to be taxed in their own right.”
“3.18. VAT: exemption for all domestic service charges. The concession exempts form [sic]1 April 1994 all mandatory service charges or similar charges paid by the occupants of residential property towards the upkeep of the dwellings or block of flats in which they reside and towards the provision of a warden, caretakers, and people performing a similar function for those occupants. The concession does not exempt service charges paid in respect of holiday accommodation as defined in paragraph 1(e) of and Notes 11 13 [sic] to Group 1, Schedule 9,VAT Act 1994 (http://www.legislation. gov.uk /ukpga/1994/23/contents) (formerly paragraph 1(d) of and Notes (10) (10A) and (10B) to Group 1, Schedule 6,VAT Act 1983 ).”
“3. Background Customs and Excise Brief 03/94 issued February 1994 introduced ESC 3.18. The concession applies only when residential leaseholders and freeholders pay a mandatory service charge for the same common services on a common estate. Its purpose is to allow the same VAT treatment of these service charges for all of those living on the estate. The concession came into effect from1 April 1994 . If a landlord is contractually obliged to provide services to all occupants of a common estate, they may choose to use the concession to treat these supplies, when made to a freeholder, as exempt from VAT. Leaseholders and tenants are exempt from paying VAT on these charges as the charge is directly linked to an exempt supply of an interest in land. Freeholders do not have this link, so for them, these charges are normally taxable at the standard rate of VAT. Landlords often use property management companies or companies offering similar services, to fulfil their legal obligations to the occupants of an estate. The property management company obtains goods and services on behalf of the landlord and charges a management fee for providing such a service. This management fee is taxable at the standard rate of VAT and is not covered by ESC 3.18. Property management companies, or similar, cannot use the concession. The Upper Tribunal (Lands Chamber) decision of15 September 2015 in the case of Mrs Janine Ingram(2015) UKUT 0495 (LC) confirmed HMRC’s view of how the concession operates. HMRC knows of a number of property management and similar service companies who provide goods and services to landlords of residential buildings, but are not correctly accounting for VAT. These companies cannot use the concession to: • treat their supplies as if made to the occupant rather than the landlord • recharge costs borne on behalf of the landlord, back to the landlord • recharge staff or personnel costs to the landlord ...”
“2.2. Services covered by the concession The services covered are the: • upkeep of the common areas of the estate, dwellings or blocks of flats where the occupants live and where these charges are mandatory for all the occupants • provision of a warden, superintendent, caretaker or those performing a similar function connected with the day-to-day running of that estate, dwelling or blocks of flats, for those occupants • general maintenance of the exterior of a block of flats or individual dwelling where the residents cannot refuse this This concession does not apply to any management fees charged by a management company, or similar, for its services. 2.3. Mrs Janine Ingram(2015) UKUT 0495 (LC) The Upper Tribunal (Lands Chamber) released a decision on15 September 2015 confirming that the concession applies in the circumstances outlined in paragraph 2.1. The decision also confirmed that if a landlord is contractually obliged to provide services to the occupant of a property, and uses a property management company or similar, to provide these services, the property management company cannot use the concession. This is because the management company is providing a standard-rated supply of services to the landlord, not the occupant, even though they’re collecting payment on behalf of the landlord directly from the occupant (see sections 3 and 4). The Upper Tribunal was content that paragraphs 12.2 and 12.4 of Land and property (VAT Notice 742), as extant at that time, were consistent with the original Customs and Excise Brief 03/94. However, it was considered that the wording could be clearer. This information sheet and the updated section 12 of Land and property (VAT Notice 742) (https://www.gov.uk/guidance/vat-on-land-and-property-notice-742#section12), are intended to provide that clarity. ... 4. Property management companies or similar Residential landlords will usually engage a management company, or similar, to enable them to fulfil their contractual obligations to the occupant. If you are such a management company, you will deal directly with both the occupants of the building and with the landlord. (a) Dealings with the occupants of a building by you on behalf of a landlord Where a landlord allows you to collect periodic payments of mandatory service charges on their behalf, from the occupants of a building, the monies you collect and retain for your use, together with any payments received from the landlord are consideration for your supply of services to the landlord. This is a taxable service you provide to the landlord, so ESC 3.18 does not apply. (b) Services you provide on behalf of the landlord You may pay for the goods and services required by the landlord (and you may use the monies collected on behalf of the landlord from the occupants of the building to do so). You then have 2 choices: 1. if you recover input tax on these goods and services which you acquire on behalf of the landlord, you should use the invoicing procedure as outlined in section 23 of the VAT guide (VAT Notice 700) (https://www.gov.uk/guidance /vat-guide-notice-700#section23) and charge the same amount of tax to the landlord in the same VAT accounting period, or 2. you can treat the recharge of the costs you incur on behalf of the landlord, as a disbursement providing the relevant conditions are met - for more information on disbursements, see section 25 of the VAT guide (VAT Notice 700) (https://www.gov.uk/guidance/vat-guide-notice-700#section25). ... 6. Common errors HMRC has identified the following common scenarios where people have failed to apply ESC 3.18 correctly: (a) Property management companies, or similar treating their supply as being to the occupant, rather than the landlord As outlined in sections 3 and 4, if you’re a management company, or similar, providing services to the landlord so that their contractual obligations to the occupants are met, then this supply is from you to the landlord and is taxable at the standard rate of VAT. You cannot treat your supplies as VAT exempt supplies, made to the occupant. So ESC 3.18 does not apply. This type of error usually arises because management companies wrongly assume that as they’re collecting periodic payments directly from the occupant, they must be making their supply to the occupant and not the landlord. However, the monies collected are contractual payments due to the landlord for their supply. Any collected monies kept by management companies, or similar, and not used to meet the contractual obligations of the landlord, will be payment for the services provided by the management company, for acting on behalf of the landlord. These services are taxable at the standard rate of VAT. (b) Not recharging costs borne on behalf of the landlord back to the landlord As outlined in section 4(b), If you’re a management company, or similar, and bear the initial cost of the goods or services acquired on behalf of the landlord, you can recover these costs from the landlord. Some management companies however, are recovering input tax on bought-in supplies and then recharging them directly to the occupant exempt from VAT. They have been relying on ESC 3.18 to do so and this has led to their fees also being incorrectly treated as exempt. (c) Supply of staff As outlined at section 5, the recharge of staff or personnel costs by a management company, or similar, is a taxable supply to the landlord. In some cases, management companies have wrongly relied on ESC 3.18 to recharge staff or personnel costs direct to the occupant, exempt from VAT.”
“[30] The principles that we understand to be derived from these authorities are as follows: (1) The FTT is a creature of statute. It was created bys. 3 of the Tribunals, Courts and Enforcement Act 2007 (“TCEA”) “for the purpose of exercising the functions conferred on it under or by virtue of this Act or any other Act”
‘We have heard no argument about s. 83(1) VATA and therefore express no view about the correctness or otherwise of the judge’s interpretation of that section.’
“[152] The starting point is therefore that appeal grounds which concern public law arguments should be pursued in judicial review proceedings rather than before the FTT. However, we, like the FTT, accept that the FTT may have jurisdiction to consider appeal grounds based on public law arguments (such as legitimate expectation) depending on the statutory provisions under consideration. [153] Thus, the statutory context is key, as the UT in Henryk explains. [154] In this appeal, the taxpayer appeals under s.83(1)(b) VATA, which permits appeals to the FTT with respect to “the VAT chargeable… on the importation of goods from a place outside the member States.”
‘We note one point immediately, which is that on the face of it, the scope of section 83(1)(p) is broader than the scope of section 83(1)(c) (the provision in issue both in Oxfam and Noor), because an appeal lies only with respect to the amount of an assessment but instead with respect to “an assessment… under section 73(1).” And the wording of section 73(1), on the face of it, is permissive not mandatory – ‘the Commissioners may assess the amount of VAT due to the best of their judgment and notify it.’
“1(1) Subject to sub-paragraphs (3) to (7) below, a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule (a) at the end of any month if the person is UK-established and the value of his taxable supplies in the period of one year then ending has exceeded£85,000 ; or (b) at any time, if the person is UK-established and there are reasonable grounds for believing that the value of his taxable supplies in the period of 30 days then beginning will exceed£85,000 .”
“[142] The statutory jurisdiction conferred upon the FtT by s 3, TCEA 2007 is in our view to be read as exclusive and the closure notice appeals under Sch 1A, TMA do not extend to what are essentially parallel common law challenges to the fairness of the treatment afforded to the taxpayer. The extra-statutory concession is, by definition, a statement as to how HMRC will operate in the circumstances there specified and its failure to do so denies the legitimate expectation of taxpayers who had been led to expect that they would be treated in accordance with it. We are not concerned as in these statutory appeals with the direct application of the taxing instrument modified, or otherwise, by any relevant principles of EU law. The sole issue in relation to ESC B41 is whether it was fairly operated in accordance with its terms. [143] We therefore consider that the reasoning of Sales J in Oxfam v Revenue and Customs Comrs has no application to the statutory jurisdiction under s 3, TCEA 2007 in the sense of giving to the FtT and the Upper Tribunal jurisdiction to decide the common law question of whether HMRC has properly operated the extra-statutory concession. The appeals are concerned with whether the Trustees are entitled under s 231 to claim the benefit of the credits on FIDs and foreign dividends. Not with what is their entitlement under ESC B41. This reading of TCEA 2007 is strengthened by s 15, TCEA 2007 which gives the Upper Tribunal jurisdiction to decide applications for judicial review when transferred from the Administrative Court. It indicates that when one of the tax tribunals was intended to be able to determine public law claims Parliament made that expressly clear. There are no similar provisions in the case of the FtT.”
“[87] In our view, the FTT does not have jurisdiction to give effect to any legitimate expectation which Mr Noor may be able to establish in relation to any credit for input tax. We are of the view that Mr Mantle is correct in his submission that the right of appeal given by s 83(1)(c) is an appeal in respect of a person’s right to credit for input tax under the VAT legislation. Within the rubric ‘VAT legislation’ it may be right to include any provision which, directly or indirectly, has an impact on the amount of credit due but we do not need to decide the point. Thus, if HMRC have power (whether as part of their care and management powers or some other statutory power) to enter into an agreement with a taxpayer and that agreement, according to its terms, results in an entitlement to a different amount of credit for input tax than would have resulted in the absence of the agreement, the amount ascertained in accordance with the agreement may be one arising ‘under the VAT legislation’ as we are using that phrase. In contrast, a person may claim a right based on legitimate expectation which goes behind his entitlement ascertained in accordance with the VAT legislation (in that sense); in such a case, the legitimate expectation is a matter for remedy by judicial review in the Administrative Court; the FTT has no jurisdiction to determine the disputed issue in the context of an appeal under s 83. As Mr Mantle puts it, the jurisdiction of the FTT is appellate (ie on appeal from a refusal of HMRC to allow a claim). The FTT has no general supervisory jurisdiction over the decisions of HMRC. That does not mean that under s 83(1)(c) the FTT cannot examine the exercise of a discretion, given to HMRC under primary or subordinate VAT legislation relating to the entitlement to input tax credit, and adjudicate on whether the discretion had been exercised reasonably (see eg Best Buys Supplies Ltd v Customs and Excise Comrs[2011] UKUT 497 (TCC) at [48]–[53],[2012] STC 885 at [48]–[53]—a discretion under reg 29(2) of the VAT Regulations). Although that jurisdiction can be described as supervisory, it relates to the exercise of a discretion which the legislation clearly confers on HMRC. That is to be contrasted with the case of an ultra vires contract or a claim based on legitimate expectation where HMRC are acting altogether outside their powers. [88] In our view, the subject matter of s 83(1)(c) (‘the amount of input tax which may be credited to a person’) is the input tax which is ascertained applying the VAT legislation. Input tax is a creature of statute under the VATA 1994, reflecting the provisions of, now, EC Council Directive 2006/112 of28 November 2006 on the common system of value added tax (OJ 2006 L 347, p 1) (the principal VAT Directive). Similarly, the crediting of an amount of input tax is a matter of statute. The appellate jurisdiction of the FTT is formulated, in the case of s 83(1)(c), by reference to those concepts. The FTT is not, expressly at least, given jurisdiction under this provision to decide the amount of something which is not input tax and which is not to be credited in accordance with the statutory provisions. [89] Suppose then that a taxpayer had received express representations from HMRC sufficient to give rise to a legitimate expectation that certain amounts of VAT paid by the taxpayer would be allowed as input tax notwithstanding that those amounts are not input tax for which credit could be given pursuant to the legislation. Suppose that the Administrative Court were prepared to grant a remedy in order to give effect to that legitimate expectation. We are not clear precisely what such a remedy would be, but one thing it could not do would be simply to order that HMRC give credit for the input tax. Take the present case as an example. Obviously the Administrative Court could not declare the VAT on the invoices to be allowable input tax—it clearly was not. Indeed, it would not have been input tax even if Mr Noor had claimed it within the six-month time limit since it would only have been counted (s 24(6)(b)) or treated (reg 111(1)(a)) as input tax. Nor, we consider, could the Administrative Court order HMRC to authorise Mr Noor to treat the VAT on the invoices as if it were input tax for the purposes of reg 111(1): that would fly in the face of reg 111(2). What we think the Administrative Court could do is to order HMRC to treat Mr Noor as entitled to a credit of an amount equal to the VAT on the invoices. But that amount it not itself input tax nor is it treated as input tax. The credit which Mr Noor would receive is not a credit for input tax but is a financial adjustment to give effect to his legitimate expectation. Indeed, it is not a ‘credit’ within the meaning of the legislation since such a credit is only given for input tax. Instead, it is, as we have described it, a financial adjustment to be reflected in the account between the taxpayer and HMRC. [90] We can put this point in a slightly different way. The amount of input tax (or of any other VAT which can be treated as input tax) which may be credited to a person is, prima facie, to be determined in accordance with the statutory provisions. If the taxpayer has a legitimate expectation to be credited with input tax of a different amount, he may be given a remedy by the appropriate court or tribunal to reflect that legitimate expectation in financial terms. But that right does not affect what is ‘input tax’ (or what can be counted or treated under the legislation as input tax eg under s 24 or reg 111) or what can be ‘credited’ for input tax in accordance with the statutory provisions. The financial adjustment sits outside the amount of ‘input tax which may be credited’ to a person. The FTT has no jurisdiction to effect that financial adjustment since its jurisdiction under s 83(1)(c) relates only to ‘input tax which may be credited’ to a person.”
“[93] Finally, HMRC suggest that since Xerox cannot rely on s 127 FA 1999 for its interest rate claim, its only claim is in equity or restitution, both of which are outside the remit of this Tribunal. The scope of this Tribunal’s jurisdiction, when a claim relating to a tax appeal overlaps with a non-statutory remedy has been reviewed very recently by the Upper Tribunal in its extensive obiter comments in the 2021 Zeman decision. The relevant principles which I take from Zeman are; (1) The extent of the Tribunal’s jurisdiction is in the first instance a question of statutory construction ‘We have no doubt that the nature of the FTT’s jurisdiction depends on the proper construction, in the context of the statutory provision to which it relates, of the statutory provision by which it is given’ [27]. (2) There is a distinction between cases in which the nonstatutory legal principle concerns the amount of tax due (when nonstatutory principles can be applied) and cases where the nonstatutory legal principle is being used to argue about something other than whether a specific amount of tax was payable by a particular taxpayer. [46] and ‘s 83(1)(t) … conferred an appeal jurisdiction only where the challenge was that an amount of VAT was not in fact due. It did not confer jurisdiction in a case where the relevant VAT amount was due, but was said to be repayable for an extraneous reason’ [48] (3) The FTT does not have a general supervisory jurisdiction; the question is whether the statutory scheme expressly or by implication excludes the ability to raise a public law defence. [70]. By reference to the VAT legislation under consideration in Zeman, this comes down to considering the scope of the Tribunal’s jurisdiction ‘not by reference to any particular legal regime or type of law, but instead by reference to the subject matter of the subsection’.”
“[43] In a later case, HMRC v Abdul Noor[2013] UKUT 071 (TC) , the Upper Tribunal took exactly the opposite view of the same issue under section 83(1)(c), i.e. whether there was jurisdiction on an appeal with respect to “the amount of any input tax which may be credited to a person”, to consider a taxpayer’s claims based on the public law concept of legitimate expectation. [44] The Upper Tribunal concluded not. It considered that the right given by 83(1)(c) is in respect of a person’s right to credit for input tax “under the VAT legislation”
“[20] The next question is whether the commissioners had power under section 1 of TMA to make an extra-statutory allowance to all widowers. On this point the judgment of the Court of Appeal is in my opinion unanswerable. The commissioners are not "the Crown", owners of the consolidated fund and able to deal with its property like any other owner (see Secretary of State for Trade and Industry v Frid[2004] 2 AC 506 , para 27). In that respect, this case is different from Hooper's case. The commissioners are a statutory body created by theInland Revenue Regulation Act 1890 . They are charged by section 13(1) of that Act to "collect and cause to be collected every part of inland revenue." Section 1 of TMA gives them what Lord Diplock described in R v Inland Revenue Commissioners, Ex p National Federation of Self-Employed and Small Businesses Ltd[1982] AC 617 , 636 as ‘a wide managerial discretion as to the best means of obtaining for the national exchequer from the taxes committed to their charge, the highest net return that is practicable having regard to the staff available to them and the cost of collection.’ [21] This discretion enables the commissioners to formulate policy in the interstices of the tax legislation, dealing pragmatically with minor or transitory anomalies, cases of hardship at the margins or cases in which a statutory rule is difficult to formulate or its enactment would take up a disproportionate amount of Parliamentary time. The commissioners publish extra-statutory concessions for the guidance of the public and Miss Rose drew attention to some which she said went beyond mere management of the efficient collection of the revenue. I express no view on whether she is right about this, but if she is, it means that the commissioners may have exceeded their powers under section 1 of TMA. It does not justify construing the power so widely as to enable the commissioners to concede, by extra-statutory concession, an allowance which Parliament could have granted but did not grant, and on grounds not of pragmatism in the collection of tax but of general equity between men and women.” “Chargeable”
“Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.”
“[93] So far as concerns the words ‘with respect to’, we do not agree that those words are wide enough ‘to cover any legal question capable of being determinative of the issue of the amount of input tax which should be attributed to a taxpayer’ at least not in relation to the ‘amount of input tax’ which should be attributed to a taxpayer. As we have said, we do not see any financial credit to which Mr Noor may be entitled by way of recognition of his legitimate expectation as ‘input tax’. But clearly Sales J is including such financial adjustment within the phrase ‘amount of input tax’. On that basis, Sales J’s reading goes too far, in our view. It departs from the natural meaning of s 83(1)(c) which, reading the subsection as a whole, is focused on the large number of decisions on rights and obligations under the VAT legislation which HMRC have to make and in respect of which a specialist tribunal is provided. Quite apart from that, Sales J’s reasoning applies to all of the paragraphs of s 83(1) and would be to give the FTT, as we have said, an extensive if not comprehensive judicial review jurisdiction. For reasons already given and with respect to Sales J, we do not consider that it is plausible to suppose that that is what Parliament intended.”
“[122] It is the inevitable consequence of the FTT’s factual findings when applying the domestic law concept of legitimate expectation that the statements made in HMRC’s October and November 2017 letters: (1) did not give precise, unconditional and consistent assurances; (2), were not such as to give rise to a legitimate expectation on the part of the person to whom they were addressed; (3), were not consistent with the applicable rules on the imposition of customs duty and VAT which mandated their payment. [123] Therefore, there could be no legitimate expectation created by HMRC for the purposes of EU law which would entitle the Appellant to remission of the duty pursuant to Article 120 (ie. there was not legitimate expectation which could give rise to special circumstances or otherwise lead to the remission of duty). [124] Further, any error as to the applicability of legitimate expectation to Article 120 would be immaterial given that it was not (and could not) be shown that there was “no obvious negligence” (see our conclusion on Ground 2, above). So even if the Appellant were right that (a) it had a legitimate expectation, (b) the FTT had jurisdiction to consider it and (c) it ought to have done so, and (d) if it had then it would have concluded that ‘special circumstances’ exist, this would only ever satisfy part of the Article 120 test. [125] It is important to note that Grounds 2, 3 and 4 overlap. All concern the question whether the customs debt ought to have been remitted under Article 120 of the UCC. Therefore, the difficulties we have identified above in relation to the application of Article 120 to this question are fatal to Grounds 3 and 4.”
“[47] We have carefully considered whether it would be right for us to deal with Ground 1 so as to give guidance to the FTT on the scope of its jurisdiction to deal with further claims of this nature. We have concluded, however, that this would not be the appropriate course to follow. We are concerned that any guidance we give to the FTT in a situation where, in our judgment, there was quite clearly no legitimate expectation of the kind that EU law would protect, would be answering a purely academic and theoretical question. We do not think that an issue of this kind is best addressed in a case where, on the facts, it does not actually arise. In short, we consider that the scope of the FTT’s jurisdiction is best addressed by a binding statement from this Tribunal only in a case where such a statement is necessary. We will not, therefore, address Ground 1.”
“[33] Mr Hodgson's problem is this. No matter how impeccably the Customs officers act in the process of reaching their decisions under Article 5(3), the likes of Mr Hodgson, who exercise their Community law rights and bring tobacco into the U.K. for their own use but fail to satisfy the Commissioners that it is not held for a commercial purpose. [sic] have no recourse to the national courts to ensure proper application of the law. Judicial review would allow an applicant such as Mr Hodgson to put before the Court written or affidavit evidence bearing on the " reasonableness" of the Commissioners' decision. But it still would not enable the Court to review the merits of his claim to be exercising his Community law rights. We recognise that not every rule that prevents a court giving relief in a particular case is to be regarded as making the enforcement of rights impossible; the REWE case indicates. for example. that time-limits are not necessarily to be so regarded. But Article 5(3) as construed in CARRIER goes much further than that.”
“Based on the straightforward construction of the tripartite lease agreement between CCML, RRL and the lessee, there exist separate enforceable obligations owed by the lessee to CCML as the management company, and by CCML to the lessee. CCML says the contractual position clearly dictates that the direction of the supply of services being provided by it is to the lessee. This position is supported by the decision of the Tribunal in Canary Wharf Ltd (Decision of VAT Tribunal, Sir Stephen Oliver QC, [1996] V&DR 353, (VTD 14513)). Therefore, HMRC’s conclusion that CCML is supplying the services to RRL is incorrect (‘Ground 1’).”
“[47] This approach appears to me to reflect the approach of the Supreme Court in the subsequent case of WHA Ltd v Revenue and Customs Comrs[2013] UKSC 24 ,[2013] 2 All ER 907 ,[2013] STC 943 where at [27], Lord Reed said that ‘[t]he contractual position is not conclusive of the taxable supplies being made as between the various participants in these arrangements, but it is the most useful starting point’. He then went on in paras [30]–[38] to analyse the series of transactions, and in para [39], he explained that the tribunal had concluded that ‘the reality is quite different’ from that which the contractual documentation suggested. Effectively, Lord Reed agreed with this, and assessed the VAT consequences by reference to the reality. In other words, as I said in Secret Hotels2 Ltd (formerly Med Hotels Ltd) v Revenue and Customs Comrs[2014] UKSC 16 ,[2014] 2 All ER 685 ,[2014] STC 937 (at [35]), when assessing the VAT consequences of a particular contractual arrangement, the court should, at least normally, characterise the relationships by reference to the contracts and then consider whether that characterisation is vitiated by [any relevant] facts.”
“3. The Management Company HEREBY COVENANTS with the Landlord and separately with the Lessee to observe and perform the covenants and obligations specified in the Seventh Schedule hereto.”
“The first question: was there a contractual obligation to supply? [22] The first question, then, is whether, on the true construction of the Contract, PwC contracted to supply services to Airtours. There is no doubt that the Contract imposes an obligation on PwC to supply services to the Institutions. The issue is whether PwC agreed, in addition, with Airtours that they would supply those services. Thus, it is enough for Airtours’ purposes if it can establish that PwC were under a contractual obligation to Airtours to supply services, such as providing the Report, to the Institutions. Airtours does not have to show that PwC were under a contractual obligation to supply any services directly to Airtours. ... [31] Confining myself for the moment to the express words of the Contract, it appears to me that the Commissioners are correct, and there is no obligation on PwC, as a matter of contract, to Airtours to provide the Services whether to the Institutions or to Airtours. The position appears pretty clear if one confines oneself to the Letter: PwC’s obligation to provide the Services set out in the Appendix is owed solely to the Institutions, and Airtours is only a party for the purpose of agreeing to pay PwC’s fees, to provide PwC with an indemnity, and to acknowledge the cap on any damages for which PwC may be liable. The Terms are, without doubt, less clear, but there is nothing in them which supports the notion that they were intended to widen PwC’s duties beyond what was in the Letter. In any event, the notion that the Terms can give the meaning of ‘you’ in the Letter any different meaning from that which it naturally has on the face of the Letter is fatally undermined by the fact that the Terms are contained in a standard form, and, even more, by the fact that ‘you’ in the Terms clearly has different meanings in different places.”
“(ii) If the Management Company shall at any time hereafter make default in the performance and observance of any of the covenants or obligations imposed upon it and specified in the Seventh Schedule hereto or if the Management Company shall enter into liquidation whether compulsory or voluntary save for the purposes of reconstruction or amalgamation the Landlord will undertake the performance of all or any of the covenants and obligations imposed upon the Management Company hereunder but without prejudice to any other right or remedy of the Landlord against the Management Company or the Lessee or any other person and the expenses thereof shall constitute a debt due from the Management Company to the Landlord and shall be repaid by the Management Company on demand or in lieu thereof and after notice in writing given by the Landlord to the Lessee the Lessee shall pay to the Landlord all sums due to the Management Company pursuant to the Sixth Schedule hereto until further notice which sums shall then be construed as rent due to the Landlord hereunder for the purpose of Clauses 1 and 6(i) hereof.”
“7. That if at any time the Management Company shall make default in the performance and observance of any of the covenants or obligations imposed upon it and specified in the Seventh Schedule hereto or if the Management Company shall enter into liquidation whether compulsory or voluntary save for the purposes of reconstruction or amalgamation the Landlord will undertake the performance of all or any of the said covenants imposed upon the Management Company hereunder.”
“4. The Landlord shall not be liable in respect of any obligations assumed whether hereunder or otherwise by the Management Company save as hereinafter provided.”
“Now, as to the first question, there was prior to the Judicature Act, 1873, a great difference between the Courts of Law and the Courts of Equity on the subject of merger. The rule of the former was rigid, that whenever a term of years and a freehold estate, whether for life or in fee, immediately expectant upon the term, vested in the same person in his own right, the term was merged in the freehold, whatever may have been the intention of the parties to the transaction which resulted in the union. The Courts of Equity, on the other hand, in many cases treated the interest which merged at law as being still subsisting in equity. They had regard to the intention of the parties, and, in the absence of any direct evidence of intention, they presumed that merger was not intended, if it was to the interest of the party, or only consistent with the duty of the party, that merger should not take place. Perhaps the commonest application of these principles was when a tenant for life paid off a charge upon the inheritance. The charge was considered to be still kept alive for his benefit, or for the benefit of his executors, although, if an owner in fee had paid off the charge, no such consequence would have followed. These principles were applicable equally to the merger of estates in land as to merger of charges on land. It was well established that, according to the strict rules of the common law, there would be merger, notwithstanding that one of the two estates might be held in trust, and the other beneficially, by the same person, or one might be held on one set of trusts and the other on another set of trusts. But it was equally well established that equity would interfere, and would, if necessary, decree the execution of such deeds as would replace the parties in their proper position: see Saunders v. Boumford (1), where Lord Nottingham L.C. decreed that, notwithstanding the merger of a term, the plaintiff should hold possession of the premises during the remainder of the term, and that the defendant should make a further assurance of the remainder of the term. The merger was treated as an accident prejudicial to the real beneficial interests of the parties: see also Attorney General v. Kerr (2), a remarkable instance of the application of the equitable doctrine. I think the decision of Farwell J., or rather his dictum to this effect, in Ingle v. Vaughan Jenkins (3), is consistent with principle and is supported by authority. A Court of Equity had regard to the intention of the parties, to the duty of the parties, and to the contract of the parties, in determining whether a term was to be treated as merged in the freehold. This being the state of the law prior to the Judicature Act, 1873, it was enacted by s. 25, sub-s. 4, of that Act that "there shall not, after the commencement of this Act, be any merger by operation of law only of any estate, the beneficial interest in which would not be deemed to be merged or extinguished in equity.’”
“185. Merger There is no merger by operation of law only of any estate the beneficial interest in which would not be deemed to be merged or extinguished in equity.”
“We accept that the management company has, throughout the duration of the Management Agreement, been making supplies to the headlessee of 10 Cabot Square (eg CWL). CWL has its repairing obligations to perform under its own headlease from Investments in respect of the whole of the demised premises. There are still parts of the buildings in the Canary Wharf Estate that are unlet; so far as the management company's services relate to these, they are supplied exclusively to, eg, CWL and CWL bears its share of the service charge expenses. So far as the buildings and floors that are actually the subject of underleases, CWL still has the obligation to comply with its covenants as landlord. But do those features mean that the management company must be regarded as supplying the services to CWL and not to the occupational underlessee (which in this case is Barclays Bank)? If so, then the only relevant supplies to Barclays Bank will be CWL's single and exempt supply of a major interest in land. A feature that points to the supplies of all three classes of services being supplied direct from the management company to Barclays Bank as occupational underlessee is the wording and the structure of the underlease. Clause 5, as we have noted, contains the covenant of the management company with Barclays Bank, as tenant, (separately from the management company's covenant with CWL) to perform the services; that covenant is specifically guaranteed by CWL as 'landlord'. By Clause 3(c) Barclays Bank is personally obligated to pay its due percentage of the service charge to the management company. In short, the documentation unambiguously states that the management company is to provide the services to Barclays Bank and Barclays Bank has to pay the management company for these. In this connection we bear in mind that the management company is a substantial company with its own staff, premises and functions. It invoices the occupational sublessees for the service charges quite separately from any invoices that may be raised on them (under Clause 3(a)) for the rent. Another feature pointing to the same conclusion is that the services required of the management company by the underlease are of their nature services to be used and paid for by Barclays Bank. The majority of the services are admittedly ones that CWL needs as landlord to enable it to comply with its landlords' covenants to repair and to give quiet possession; but they are also directed separately at Barclays Bank's under leashed interest, providing the occupant with a much wider range of facilities than simply the benefit of, for example, quiet enjoyment. Many of the services are personal in nature; as such they have little or nothing to do with CWL's interest as landlord. We have in mind the surveillance and visitor control services (see Sch 6 Pt A item 7), the refuse service (item 12) and the transportation services (item 16). Many of the services are left to the management company's discretion, such as the provision of signage (item 8) landscaping (item 9) and window cleaning (item 11). Looking both at the documentation and at the way in which the arrangements for management services have been carried out and paid for, it is in our view impossible to conclude that the management company has not provided the services of all three categories to Barclays Bank as occupational underlessee. The fact that the management company's provision of the services confers a real benefit on CWL as landlord does not in our view displace the real as well as the contractual flow of services from the management company to Barclays Bank. In this connection we bear in mind Laws J's observation in Commissioners of Customs and Excise v Reed Personnel Services Ltd[1995] STC 588 at page 595 where he said: ‘Where the facts involve only two parties there is necessarily little or no room for argument over who supplies what to whom. Where there are three (or more), the position may be very different. It should in my judgment be recognised that in that situation the parties' contractual arrangements, even though exhaustive for the purposes of their private law? obligations, may not - as indeed they need not - define and conclude issues arising as to supplies under the 1983 Act; and where they do not, the resolution of such issues remains a questions of fact for the tribunal.’ Our conclusion appears to be in line not just with the reality of the situation but also with the statutory definition of 'supply' which, as we noted in para 37 above, includes all forms of supply but 'not anything done otherwise than for a consideration'. Here the consideration for the management services is derived from Barclays Bank as occupational underlessee; the things 'done' in return are the services provided by the management company to or for the benefit of Barclays Bank.”
“[34] The parties were agreed that in order for an extra-statutory concession to be capable of giving rise to a legitimate expectation on the part of a taxpayer, it must be clear and unambiguous, and that the question is how, on a fair reading of the concession, it would have been reasonably understood to those to whom it was addressed (ie the ordinarily sophisticated taxpayer): Re Finucane’s application for judicial review (Northern Ireland)[2019] UKSC 7 ,[2019] 3 All ER 191 , [2019] NI 292, per Lord Kerr at [62]; Paponette v A-G[2010] UKPC 32 ,[2011] 3 LRC 45 ,[2012] 1 AC 1 , per Lord Dyson at [30].”
“[44] To summarise: (1) Mandatory service charges paid by a residential occupier to the landlord which are in the nature of rent, being directly related to the tenant's right of occupation, are exempt from VAT by virtue of s.31 and Sch.9, Pt II, Group 1 of the 1994 Act and it is not necessary to rely on the Concession. (2) Mandatory service charges paid by a residential occupier which are not in the nature of rent because they are owed to a person who does not supply any accommodation fall within the Concession and are therefore exempt from VAT provided they are paid “towards the upkeep of the dwellings or block of flats in which they reside and towards the provision of a warden, caretakers and people performing a similar function for those occupants” but not otherwise. (3) The Concession does not apply to optional services supplied by a landlord, managing agent or anyone else to a residential occupier. (4) The Concession does not apply to any charges paid by the landlord (or other person levying the service charge) to third parties for the supply of services even though the cost of those services is passed on to a residential occupier through a service charge.”
“18. Meaning of “service charge” and “relevant costs”. (1) In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent – (a) which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management and (b) the whole or part of which varies or may vary according to the relevant costs.”
“[62] From these authorities it can be deduced that where a clear and unambiguous undertaking has been made, the authority giving the undertaking will not be allowed to depart from it unless it is shown that it is fair to do so. The court is the arbiter of fairness in this context. And a matter sounding on the question of fairness is whether the alteration in policy frustrates any reliance which the person or group has placed on it. This is quite different, in my opinion, from saying that it is a prerequisite of a substantive legitimate expectation claim that the person relying on it must show that he or she has suffered a detriment.”
“(A4) No general principle of EU law is part of domestic law after the end of 2023.”
“(5) Retained general principles of EU law – (a) continue to be relevant (despite the provision made by section 4 of REULA 2023) for the purpose of interpreting VAT and excise law in the same way, and to the same extent, as they were relevant for that purpose before the coming into force of that section, but (b) otherwise have effect for that purpose subject to the provision made by that Act (including, in particular, the amendments made by section 6 of that Act (role of courts)).”
“(f) Bringing forward an accrued cause of action [81] The question of why pre-Brexit accrued causes of action are not extinguished by the repeal of section 2(1) of the ECA 1972 has been considered in a number of cases and academic articles. This topic has been bedevilled by unhelpful labelling of the different choices, in particular treating “accrued EU rights” as being one option as contrasted with “retained EU rights”
“[175] I also agree with Lord Sales and Lady Rose on ground 2 (ie which law applies and why?). However, given their disagreement with Lord Lloyd-Jones on ground 2, this judgment sets out in my own words why I consider that Lord Sales and Lady Rose are correct. I agree that what they call the “Complete Code analysis” (but which I shall refer to as the “retained EU law analysis”) is to be preferred to what they refer to as the “Interpretation Act analysis” (but which I shall refer to as the “not retained EU law analysis”). At root, my reasoning is that the former analysis is to be preferred because, after IP completion day (31 December 2020 ), accrued EU law rights fall within what is referred to as “retained EU law” in theEuropean Union (Withdrawal) Act 2018 as amended by theEuropean Union (Withdrawal Agreement) Act 2020 (which I shall refer to compendiously as the “EU (Withdrawal) Act 2018 ”). Accrued EU law rights continue to exist, and have not been retrospectively removed, but do so as part of retained EU law. Accrued EU law rights do not exist as a valid body of law separate from retained EU law.”
“[21] Some EU laws were expressly excluded from the scope of what was carried forward by the Withdrawal Act. For example, ... b. Para 2 of Schedule 1 to theWithdrawal Act 2018 effectively prohibited any further recognition of general principles of EU law in cases decided after Brexit. Further, para 3 limited the application of such general principles which had been recognised before IP completion day by providing that there is no right of action in domestic law after IP completion day based on a failure to comply with those general principles. It also precluded any reliance on general principles to disapply or quash any enactment or rule of law or to decide that any conduct was unlawful.”