The Commissioners for HMRC v Colaingrove Limited [2025] UKUT 00360 (TCC)

“3. The Appellant is part of a group of companies supplying leisure services, operating under the Haven and Warner Leisure Hotels brands. During the VAT periods in question, Butlins was also part of this group of companies. 4. The parties were engaged in a series of disputes concerning the VAT treatment of certain of the Appellant's activities as follows: (1) For VAT prescribed accounting periods 03/87 to 12/11 HMRC considered that supplies of removable contents, when sold together with static caravans, should have been standard rated. The Appellant considered the supplies were zero rated. The matter was finally resolved following various stages of litigation with a partial settlement pursuant to which HMRC made a payment (as recorded in the settlement agreement) of £13.8m together with statutory interest. These sums were repaid on 15 December 2014. (Contents Dispute) (2) For VAT prescribed accounting periods 03/89 to 12/11 HMRC considered that verandas sold with caravans too should be standard rated whereas the Appellant considered them to be zero rated. Again, following litigation HMRC repaid to the Appellant a sum of £2.6m; the payment being made on 7 May 2015. (Verandas Dispute) (3) VAT was overpaid in VAT prescribed accounting periods 06/73 to 09/08 in connection with bingo participation fees. In the relevant periods HMRC considered bingo participation and session fees to be standard rated. However, following litigation conducted by others it was established that such charges were properly exempt from VAT. On 4 May 2010 HMRC repaid £3.4m in respect of VAT overpaid in the period 03/75 to 09/08. (Bingo Dispute) (4) VAT was also overpaid in respect of prescribed accounting periods 12/02 to 12/05 in relation to certain gaming machine income. Again, such income had been considered to be subject to VAT at the standard rate when properly it should have been exempt from VAT. That resulted in a repayment of VAT in the sum of £5.6m, such payment being made on 16 November 2020. (Gaming Dispute) 5. HMRC accepted that for the full period for which the Appellant had been denied the correct VAT treatment, and had thereby been kept out of the associated funds, interest was due under section 78 VATA (s78) i.e. that due to an error on the part of the Commissioners the Appellant had accounted to HMRC for an amount by way of output tax which was not output tax due from the Appellant and/or had paid assessments to VAT which was not due. The total interest paid by HMRC under s78 is £9,321,655.75 calculated by reference to the period for which HMRC withheld funds properly due to the Appellant and applying the statutory rate for such interest. 6. However, and in consequence of their having bought a series of appeals before initially the VAT and Duties Tribunal (VDT) and subsequently to this Tribunal (FTT), the Appellant claims it is entitled to invite the Tribunal to direct that additional interest is paid in accordance with s84(8). The Appellant contends that it should be paid £8,244,823.19 in additional interest. That sum has been calculated, by reference to the evidence adduced (and in the main accepted by HMRC), as the margin between the statutory rate paid under s78 and the estimated true cost of borrowing incurred by the Appellant in the period in which it was wrongfully denied the funds by HMRC. The additional interest is not claimed in respect of the full sums repaid and referred to in paragraph 4 above. The Appellant accepts that part of the sum repaid in settlement of the Contents Dispute related to claims which were never appealed and in respect of which no s84(8) Interest entitlement accrues. We understand that certain appeals may also have been excluded from the additional interest claim; Mr Beal did not know why that was the case and indicated it may have been in error. In any event, as they are not included in the application, we do not consider them. 7. HMRC contend that no additional interest is due. In the alternative they contend that the maximum rate at which it should be payable is the conventional rate i.e. Bank of England base rate plus 1%. 8. Attached as Appendix 1[attached as Appendix 1 to this decision] to this judgment is a table of each of the relevant appeals lodged by the Appellant in respect of which the payments referred to in paragraph 4 were made. The Appendix identifies the appeal reference for each of the appeals as originally lodged with the VDT/FTT, the category of dispute, the consolidated appeal reference as appropriate, the nature of the underlying decision (i.e. whether the sums were collected/repayment was withheld by HMRC through the raising of an assessment or denial of a repayment claim), the date of the assessment/claim, date of rejection of any claim, VAT periods concerned, VAT repaid, gross interest claimed, statutory interest paid, and additional interest now claimed. 9. Lines 1 - 20 of Appendix 1 concern the Contents Dispute; 21 - 24 the Verandas Dispute, 25 - 26 the Bingo Dispute and 27 the Gaming Dispute. 10. For the reasons set out below we allow the appeal in part. Attached as Appendix 2 is a table [attached as Appendix 2 to this decision] setting out the summarised reason for our decision on an appeal-by-appeal basis (by reference to Appendix 1). The parties are to recalculate the interest due in consequence of our decision.”

“Contents Dispute 11. Examination of the chronology of the Contents Dispute demonstrates that it originated in correspondence in at least early 2000 to which reference was then made in a claim made by the Appellant for recovery of sums considered to have been overpaid as output tax. That claim was made on 30 June 2000 and, consistent with the limitation period which applied to VAT output tax overpayment claims made under section 80(1) VATA as it then stood, was limited to the three preceding years i.e. the claim was for periods 06/97 – 09/99. The value of the claim was £2,177,925.16. The claim was rejected on 12 July 2000 “until the underlying liability query” had been resolved. The notice of appeal referred to the decision of 12 July 2000 and appealed on grounds that the decision was “wrong in law … and that the voluntary disclosure [was] properly made and repayable by [HMRC]” (line 17(1) in Appendix 1). 12. It appears that the Appellant began accounting for VAT on the basis that removable contents were zero rated from VAT prescribed accounting period 03/01. This prompted HMRC to assess for the VAT which would have been due on the basis that the supplies were standard rated. The assessments were appealed on the grounds that there was no output tax due on the supplies. It is not clear from the documents which were made available to us whether these early assessments were issued on a protective basis whilst HMRC continued to consider the underlying liability of removeable contents (lines 1 – 4 of Appendix 1). 13. Following the judgment of the CJEU in Marks & Spencer plc v CEC C-62/00 which indicated that the Appellant was entitled to make claims for periods earlier than 06/97, further claims to over paid VAT were made in August 2002. These claims were rejected on 23 August 2002 expressly on the basis that the underlying supplies were properly subject to VAT. The appeal was stated to be bought under section 83(t) VATA and against a rejected claim to overpaid VAT. However, the grounds of appeal challenge HMRC’s conclusion as to the liability of the supplies (line 17(2) Appendix 1). 14. Further assessments continued to be issued post August 2002. Some assessments were appealed. The grounds of appeal brought into challenge the liability of the supplies in the context of having been assessed (lines 5 – 8 Appendix 1). 15. For some periods it appears that the Appellant did not appeal the assessments when made; but, approximately once per annum, made claims for VAT overpaid in a connection with the assessments. Section 80 VATA was amended by section 4(6) Finance (No 2) Act 2005 with effect from 20 July 2005. That amendment had the effect of bifurcating what had been section 80(1) (providing the basis of a claim to overpaid VAT) into provisions which separately provided for claims in respect of output tax over paid/declared on a return (which became subsection (1)) and sums over declared in consequence of an assessment raised by HMRC (subsection (1A)). The terms of the amendment provided that claims submitted on or after 26 May 2005 in respect of sums over declared by way of assessment were treated as submitted pursuant to section 80(1A) VATA. In the present case therefore, as the claims were submitted from 1 July 2005 they were all were treated as submitted pursuant to section 80(1A) VATA. Those claims were rejected, and the rejections appealed. The notice of appeal states such appeals were bought under section 83(b) and (p) VATA. We note that whilst these appeals did represent appeals against HMRC’s decision as to the VAT chargeable on a supply (thus within section 83(b)) they cannot have been section 83(p) VATA appeals as the decision appealed is the rejection of the claim to overpayment on the assessments and not the assessments themselves despite the effect of a claim against an overpaid assessment being the same as a challenge to the assessment (lines 9 – 16 Appendix 1). 16. It appears that in or about period 06/06 the Appellant reverted to treating removable contents as standard rated when rendering its VAT returns such that for all periods from 06/06 through to 12/11 claims were made pursuant to section 80(1) VATA which, at the time of those claims, provided for claims in respect of sums bought into account on a VAT return as output tax which was not due. The claims for periods from 06/07 were submitted after 1 April 2009 and were made on the basis that there was no longer a dispute that the supply of some items of removable contents was properly zero rated. When HMRC rejected the claims, they did so on the basis that they were “unable to accept the claim because agreement has yet to be reached on what is a fair and reasonable method of valuing the removable contents within the supply of a caravan”

“having considered that documentation and taken legal advice, I have concluded that the zero-rate which applies to caravans under VATA 1994 Schedule 8 Group 9 Item 1 should not be extended to verandas, as they do not form part of the caravan or fall within the scope of what Parliament intended when the zero rate provisions was enacted”

“Findings of fact 30. Derived from the chronology above we determine the following facts: (1) The core and underlying issue in respect of the Contents Dispute appeals at lines 1 – 17 was the liability to VAT of removable contents generally. However, each disputed decision concerned either an assessment or the rejection of a claim to overpaid output tax in identified periods consequent upon the underlying dispute. The appeals were against the disputed decisions and included grounds which concerned the VAT chargeable on the supply. (2) The Contents Dispute appeals identified at lines 18 – 20 in Appendix 1 also concerned the VAT chargeable on supplies but the principal question was apportioning the price paid for the zero-rated caravan, zero rated removable contents and standard rated removable contents. (3) All the disputed decisions and associated appeals (save that identified at line 27(2) of Appendix 1) in respect of the Verandas Dispute, Bingo Dispute and Gaming Dispute challenged the VAT chargeable on the underlying supplies in the context of rejected claims to overpaid VAT. Line 27(2) Appendix 1 is an appeal against a recovery assessment issued as there was an ongoing dispute as to the VAT chargeable on the underlying gaming machine supplies. 31. We were provided with two witness statements from Mr Iain MacMillan, the current Chief Financial Officer of the Appellant. His first witness statement set out his first-hand knowledge of the Appellant’s financing for the period from 2018. It also explained a series of investigations and exercises he had carried out. He sought to identify the Appellant’s financing strategy and rate of borrowing evidenced by the documents identified. The earliest documents retained by the Appellant and identified in the search dated back to 2000. He also explained and presented an extrapolation exercise he had undertaken to identify a reasonable estimation of the borrowing rates available to the Appellant in the period from 1975 to 1999. By his second statement he confirmed, by reference to the annual statements available, that year on year the Appellant was in a net debt position. 32. HMRC accepted the majority of Mr MacMillan’s evidence and cross examination was limited. 33. From the written statement, oral testimony and annexed documents we find the following facts: (1) Throughout the period from 1975 to 2022 the Appellant operated cash balances which facilitated the running of its business from day to day. The cash balance at 31 December each year was generally strong having completed the peak season and as deposits for the following summer were being collected. (2) Throughout the period from 2000 there is direct evidence that the Appellant’s borrowings were by way of a revolving credit facility (RCF) and term loan facilities (Term Loan). Whilst there is no direct evidence for the period prior to 2000, by reference to the annual accounts available (all years bar 1994, 1992, 1985, 1983, 1981, 1979, and 1975 were available to us), it is reasonable to conclude that the Appellant was similarly funded throughout the period 1975 - 2022. (3) The cash balance shown in the annual accounts available for each year 1975 – 2022 as at 31 December each year was smaller than total borrowing from its RCF and Term Loan. Accordingly, it is reasonable to conclude that the Appellant traded consistently in a net debt position throughout the period 1975 - 2022. (4) There is direct evidence that the Appellant’s principal lender from 2000 was Barclays Bank Plc (Barclays). From at least 2013 the senior facility with Barclays was syndicated. Mr MacMillan believed that Barclays had been the principal lender from 1975 and was not challenged in that belief; we therefore find that Barclays was the primary lender throughout the period from 1975 - 2022. (5) The interest rate terms on which the RCF and Term Loan were provided were driven by the base lending rates and the specific attributes of the Appellant. Under the loan agreement extant from 2000 the interest rate for the Term Loan was calculated by reference to London Interbank Offered Rate (LIBOR) plus a risk margin with a cap at 3.3% and a collar of 2%. (6) Mr MacMillan was able to calculate the average interest rate paid under the Term Loan for each year 2000 – 2020 as compared to the average statutory rate for the year. He accepted in cross examination that the rate applicable under the RCF may have been different but on the basis that the RCF is a short term facility principally used for emergency funding it was not a facility which was used as part of the cash flow forecasting for the business and not, in his view, relevant for determining the cost incurred by the Appellant in consequence of having overpaid VAT to HMRC. (7) The figures were not challenged by HMRC and we accept them: Year Interest rate paid Average Statutory Rate 2000 8.62 4.90 2001 7.87 4.19 2002 6.94 3.00 2003 6.56 2.67 2004 7.44 3.32 2005 6.22 3.68 2006 5.73 3.32 2007 6.88 4.41 2008 6.67 3.79 2009 3.43 0.21 2010 2.96 0.50 2011 2.96 0.50 2012 2.88 0.50 2013 2.52 0.50 2014 2.49 0.50 2015 2.51 0.50 2016 2.42 0.50 2017 2.29 0.50 2018 2.59 0.50 2019 2.72 0.50 2020 3.41 0.50 (8) Mr MacMillan undertook/caused to have undertaken an extensive search, including a request made of Barclays to locate the relevant facility agreement(s) for earlier periods but was unable to locate them. He therefore undertook an analysis which compared known facility rates to both LIBOR and Bank of England base rate across the period 2000 to 2020 from which he was able to calculate the average margin for that period to each official rate. The average margin to Bank of England base rate was calculated at 2.27%. Mr MacMillan then applied that average margin to known Bank of England base rates in the period 1975 – 1999 (LIBOR was introduced in 1996 and did not therefore represent a basis for extrapolation for earlier periods) to determine a reasonable estimate of the Appellant’s borrowing cost in the period 1975 – 1999. Neither the assumptions for, nor the accuracy of, this exercise was challenged by HMRC; we therefore accept that a reasonably inferred interest rate at which the Appellant was likely to have borrowed is as follows: Year Bank of England Base Rate Inferred interest with 2.27% margin 1975 10.76 13.03 1976 11.73 14.00 1977 8.46 10.73 1978 9.14 11.41 1979 13.76 16.03 1980 16.30 18.57 1981 13.16 15.43 1982 11.96 14.23 1983 9.86 12.13 1984 9.67 11.94 1985 12.06 14.33 1986 10.74 13.01 1987 9.60 11.87 1988 9.96 12.23 1989 13.68 15.95 1990 14.65 16.92 1991 11.56 13.83 1992 9.43 11.70 1993 5.90 8.17 1994 5.34 7.61 1995 6.57 8.84 1996 5.89 8.16 1997 6.66 8.82 1998 7.23 9.50 1999 5.35 7.62 (9) During the period in which overpayments had been made to HMRC the sums so overpaid were not available to the Appellant in the running of its business and therefore either directly or indirectly the borrowing requirements of the Appellant were increased as a consequence of the overpayments. (10) The Contents Dispute was settled by way of a settlement agreement dated 20 November 2014. The terms of that settlement agreement provided that if HMRC did not repay the agreed sum by 11 December 2014 (being 21 days from the date of the agreement) HMRC would be liable to pay simple interest on the sum at 1.5% per annum above the base lending rate from time to time of Barclays Bank Plc.”

“35. The FTT was established with effect from 1 April 2009. Prior to that date disputes between HMRC (and prior to 2005 with HM Customs and Excise (HMCE )) and taxpayers in connection with VAT were litigated before the VDT. 36. Both the VDT and the FTT have a jurisdiction defined by statute and not a general jurisdiction to determine disputes between taxpayers and HMRC. That jurisdiction is framed by reference to a list of "matters" in respect of which an appeal "shall lie" as prescribed initially in section 40(1) Finance Act 1972 (FA72) and subsequently in section 40(1) Value Added Tax Act 1983 ( VAT Act 83 ) and latterly section 83 VATA . Under FA72 and VAT Act 83 the statute specifically referenced a decision in respect of the listed matters; section 83 VATA excludes a reference to a "decision" though it remains at least implicit from the list of matters that there must be a decision "with respect to" one of the listed matters. Throughout the period from 1973 to 2011 the list of matters included: "the VAT chargeable on the supply of any goods or services" ((c) in FA72 and (b) in VAT Act 83 and VATA) "the amount of any input tax which may be credited to a person" ((d) in FA 72, (c) in VAT Act 83 and VATA) "an assessment [to VAT raised pursuant to HMRC's power to assess to the best of their judgment where a taxpayer has failed to render a VAT return, or where a return is incorrect]" ((b) in FA72, (m) in VAT Act 83 and (p) in VATA)" 37. From the implementation of VAT in 1973 through to 31 March 2009 it was a requirement (pursuant initially to section 40(2) FA72 and then section 40(2) VAT Act 83 and finally section 84(2) VATA ) that in order for an appeal to be entertained by the VDT a taxpayer was required to have made and paid all VAT returns which were required to be made. This provision was repealed with effect from 1 April 2009. 38. It was a further (and remains a) requirement that no appeal be entertained by either the VDT or the FTT in respect of decisions regarding the VAT chargeable on a supply and assessments (and subsequently a wider class of matters 1 ) unless: "the amount which the Commissioners have determined as payable has been paid or deposited with them; or on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that the amount has not been so paid or deposited" ( section 40(3) FA72, section 40(3) VAT Act 83 and section 84(3) VATA). 39. In the period 1 April 1973 – 31 March 2009, section 40(4) FA72, section 40(4) VAT Act 83 and s84(8) then all relevantly provided: "Where on an appeal under this section it is found: (a) that the whole or any part of any amount paid or deposited in pursuance of subsection (3) [be that of section 40 FA72, 40 VAT Act 83 or section 84 VATA] above is not due; or (b) that the whole or part of any [VAT credit] due to the appellant has not been paid so much of that amount as is found not to be due or not to have been paid shall be repaid … with intertest at such rate as the tribunal may determine; …" 40. That provision was repealed with effect from 1 April 2009 and section 85A was inserted into VATA . Until 31 December 2022, section 85A VATA provided for the payment of interest in the same circumstances as had been provided for under s84(8) but the discretion given to the tribunal to set the rate was removed and the rate was fixed by statute (Bank of England base rate minus 1%). Post 1 January 2023 the FTT no longer has the power to award interest but pursuant to section 102 Finance Act 2009 (FA 09) where an amount is repayable pursuant to section 85A VATA on a successful appeal there is a mandatory requirement for HMRC to pay interest at the statutory rate. The effect of section 102 FA 09 is therefore to provide for interest to be paid for the full period in which a taxpayer is out of pocket when the taxpayer is required to litigate a dispute leading to repayment in circumstances in which s78 interest may only be payable for part of the period. 41. Despite the repeal of s84(8) it continued to provide a discretion to the FTT to award interest in accordance with the transitional provisions set out in Schedule 3 the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (TTFO). Schedule 3 prescribed the transitional arrangements to be applied to each permutation of situation in which HMRC had issued a decision in respect of which the previous jurisdiction of the VDT (or the General/Special Commissioners) may have been invoked. So far as relevant to the Appellant's application for interest it is to be noted that: (1) Paragraph 4 concerned decisions of HMRC of a type listed in section 83 VATA which had been made and notified, but which had not yet been appealed to the VDT. The provisions of VATA continued to apply to such decisions subject to the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ( Tribunal Rules ). (2) Paragraphs 6 and 7 provided for the continuation of proceedings commenced inter alia before the VDT prior to 1 April 2009, again subject to the Tribunal Rules. (3) Paragraph 9 concerned decisions of the VDT made before 1 April 2009 and provided explicitly for the continued application of s84(8).” "the VAT chargeable on the supply of any goods or services" ((c) in FA72 and (b) in VAT Act 83 and VATA) "the amount of any input tax which may be credited to a person" ((d) in FA 72, (c) in VAT Act 83 and VATA) "an assessment [to VAT raised pursuant to HMRC's power to assess to the best of their judgment where a taxpayer has failed to render a VAT return, or where a return is incorrect]" ((b) in FA72, (m) in VAT Act 83 and (p) in VATA)" "the amount which the Commissioners have determined as payable has been paid or deposited with them; or on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that the amount has not been so paid or deposited" ( section 40(3) FA72, section 40(3) VAT Act 83 and section 84(3) VATA). "Where on an appeal under this section it is found: (a) that the whole or any part of any amount paid or deposited in pursuance of subsection (3) [be that of section 40 FA72, 40 VAT Act 83 or section 84 VATA] above is not due; or (b) that the whole or part of any [VAT credit] due to the appellant has not been paid so much of that amount as is found not to be due or not to have been paid shall be repaid … with intertest at such rate as the tribunal may determine; …" (1) Paragraph 4 concerned decisions of HMRC of a type listed in section 83 VATA which had been made and notified, but which had not yet been appealed to the VDT. The provisions of VATA continued to apply to such decisions subject to the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ( Tribunal Rules ). (2) Paragraphs 6 and 7 provided for the continuation of proceedings commenced inter alia before the VDT prior to 1 April 2009, again subject to the Tribunal Rules. (3) Paragraph 9 concerned decisions of the VDT made before 1 April 2009 and provided explicitly for the continued application of s84(8).”

“83. Appeals Subject to s.84, an appeal shall lie to a tribunal with respect to any of the following matters— … (b) the VAT chargeable on the supply of any goods or services … (p) an assessment— (i) under s.73(1) or (2) in respect of a period for which the appellant has made a return under this Act; … or the amount of such an assessment;.. (t) a claim for the crediting or repayment of an amount under s.80, an assessment under subs.(4A) of that section or the amount of such an assessment; …” … (b) the VAT chargeable on the supply of any goods or services … (p) an assessment— (i) under s.73(1) or (2) in respect of a period for which the appellant has made a return under this Act; … or the amount of such an assessment;.. (t) a claim for the crediting or repayment of an amount under s.80, an assessment under subs.(4A) of that section or the amount of such an assessment; …”

“(1) References in this section to an appeal are references to an appeal under section 83. (2) An appeal shall not be entertained unless the appellant has made all the returns which he was required to make under paragraph 2(1) of Schedule 11 and [...] has paid the amounts shown in those returns as payable by him. (3) Where the appeal is against a decision with respect to any of the matters mentioned in section 83[(b), (n), (p) or (q)] it shall not be entertained unless— (a) the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them; or (b) on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.” (a) the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them; or (b) on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.”

“(1) This paragraph applies if, before the commencement date— (a) HMRC have notified a decision relating to a matter to which section 83 of the Value Added Tax Act 1994 applies, and (b) no party has served notice on a VAT and duties tribunal for the purpose of beginning proceedings before such a tribunal in relation to that decision. (2) On and after the commencement date, the following enactments continue to apply (subject to sub-paragraphs (3) and (4)) as they applied immediately before that date— (a) the Value Added Tax Act 1994, (b) rule 4(2) of the VAT Tribunals Rules 1986, and (c) any other enactments that are applicable to the decision. (3) Those enactments apply subject to Tribunal Procedure Rules. (4) Any reference to an existing tribunal is to be substituted with a reference to the tribunal. (5) Any time period which has started to run before the commencement date and has not expired will continue to apply.”

“(1) This paragraph applies in relation to any decision of a VAT and duties tribunal made before the commencement date. (2) On and after that date, the following provisions continue to apply as they applied immediately before that date— (a) section 84(8) of the Value Added Tax Act 1994 (VAT), […]” 16. Pursuant to paragraph 1(2): “For the purposes of this Schedule there are “current proceedings” if, before the commencement date— (a) any party has served notice on an existing tribunal for the purpose of beginning proceedings before the existing tribunal, and (b) the existing tribunal has not concluded proceedings arising by virtue of that notice.”

“47. The issues for us to resolve are not matters which appear to have been the subject of previous litigation and principally concern what HMRC contend to be jurisdictional objections to the application of s84(8) in the present case. 48. The first objection: "Post- April 2009 Objection" is that the Tribunal has no jurisdiction to award additional interest under s84(8) in respect of a decision taken on or after 1 April 2009 and/or relating to VAT repaid in respect of prescribed accounting periods after that date. 49. By reference to Appendix 1 the Post- April 2009 Objection would exclude interest in respect of lines 18 - 20, 23 - 24 and 27(2). In the case of each of those lines the appealed decision post-dated 1 April 2009. In the case of lines 19 and 24 the appealed decisions also concerned tax paid in respect of prescribed accounting periods after 1 April 2009. 50. The second objection: "Section 80 Objection" is that we have no jurisdiction to award s84(8) Interest in respect of sums repaid following litigation of a section 80 VATA claim. 51. By reference to Appendix 1 HMRC contend that the Section 80 Objection would exclude interest in respect of all lines 9 - 27. As explained further at paragraph 112 below, the Appellant contends that even if this objection represents a valid impediment to the payment of s84(8) Interest it does not operate so as to preclude interest in respect of lines 9 - 16.”

“…[T]he Court [of Appeal] was comfortable that where sums had been paid to HMRC (or HMC&E) which, as a consequence of litigation, were determined not to have been due in the period prior to 27 July 1989 the predecessor provisions to section 84(8) VATA represented at least a vehicle for reimbursement and, in the case of an appeal bought by the recipient of a supply, the only mechanism by reference to which reimbursement would be secured (through the trust relationship identified in Williams & Glyn's).”

“134. It is our view that the apparent imprecision in the summary of s84(8) by Lawrence Collins LJ reflects the relevant provisions of section 84 VATA taken as a whole. In the period prior to 1 April 2009 a taxpayer was required to have paid all VAT due generally and in respect of any amount determined by HMRC as due from them even where the amount was disputed. Thus under 84(2) VATA they must have rendered and paid all their VAT returns and, under 84(3) VATA, have paid or deposited the amount determined by HMRC to be due in respect of: an output tax liability dispute (section 83(b)), an assessment to VAT (generally i.e. under declaration of output tax or over claim to input tax) (section 83(p)), a challenge to a the imposition of or assessment to various penalties or surcharges (section 83(n), (q) and (za)), and a requirement to make payment in consequence of a notice of joint and several liability (section 83(ra). 135. In Emblaze Emblaze Mobility Solutions Ltd v HMRC [2014] UKFTT 679 (TC) and Emblaze Mobility Solutions Ltd v HMRC [2018] UKUT 373 (TCC) both at first instance and in the UT the language used to justify the payment of interest is that the taxpayer was "kept out of its money". That too indicates to us that when interpreting the circumstances to which s84(8) applies it is to any circumstance in which a taxpayer is denied the use of money held by HMRC where it is then determined through litigation that the taxpayer was entitled to the money. 136. We therefore consider that s84(8) is not restricted in the way HMRC contend and that it applies to any situation in which on an appeal it is determined that amounts have been paid to HMRC which were not due to them. We consider that the reference to section 84(3) VATA does not preclude that conclusion given the history and historic application of the provision. 137. In the context of an appeal against a section 80 VATA claim, HMRC have a prima facie liability to repay under that section but will not have done so, having rejected the claim and been prepared to litigate that position. Accordingly, s84(8) imposes the mandatory obligation "shall be repaid" in all situations in which tax has been paid. That is to be distinguished from a liability to repay more generally.”

“138. Given our conclusion we do not need to consider whether the decision by the Appellant to pay the assessments raised in the Contents Dispute and subsequently to then make claims under section 80(1)/(1A) VATA in respect of them makes a difference. Had we needed to do so we would have concluded that it did not make a difference. As HMRC submitted the Appellant had the choice whether to pay and appeal the assessments or, as it chose to do, subsequently make claims against them. We do not accept HMRC's veiled submission that such choice in some way abused the time limits for appeal against an assessment. Section 80(1)/(1A) VATA (at the relevant time) provided for that administrative choice but, as HMRC submitted, there was in effect a jurisdictional choice and the Appellant would have had to abide by the choice it made, even though it may not have appreciated at the time the full ramifications of the choice. 139. On that basis we conclude that the Section 80 Objection is ill founded and does not preclude our exercising our discretion to award interest in respect of appeals bought against a decision rejecting a section 80 VATA claim.”

“96. Each of the appeals referenced in lines 18 - 20, 23 - 24 and 27(2) were made in respect of individual appealable decisions i.e. they relate to matters within section 83 VATA which are adverse to the Appellant in a specific and identified regard being an assessment or rejected claim and the decision in each case post-dates 1 April 2009 such claims and assessments arising consequent upon a dispute regarding the VAT liability of the underlying supplies. In our view they are not within the terms of the transitional provisions of Schedule 3 TTFO. 97. We do not consider that the individual decisions can in some way be ignored in favour of a more general and underpinning dispute or decision concerning the VAT chargeable on the supplies as the right under s84(8) to first repayment and consequently to interest arises in respect of amounts determined as repayable pursuant to a tribunal appeal. The extent to which the subject matter of the appeal is determinative of an entitlement to s84(8) Interest is considered below in connection with the Section 80 Objection; but for present purposes in order for there to be an amount determined as repayable on an appeal there must be an amount which is identified within the scope of the appeal by reference to the decision under appeal i.e. the individual decision of HMRC adverse to the taxpayer in a specific and identifiable amount. It is a such a decision which must have been made and notified prior to 1 April 2009 in order for s84(8) Interest to be payable. 98. We have also considered whether, to the extent that the decisions which post-date 1 April 2009 relate to prescribed accounting periods prior to that date, an inchoate right to interest had accrued. In this regard we have carefully considered the FTT judgment in Emblaze. 99. We have concluded that there was no such right. … 102. For the reasons given at paragraph 96 such rights had not accrued to the Appellant regarding lines 18 - 20, 23 - 24 and 27(2).”

“I recognise, of course, that the VAT scheme and the IPT scheme are not in all respects identical, but there appears to me no sound basis for contending that they should be construed and operated differently in the respects now at issue.”

“Conclusion 2 - paragraphs (b) and (l) are mutually exclusive 6. In arriving at this conclusion the Judge appears to have been influenced by two considerations in particular: first, the language and scheme of the legislation (paragraph 15); second, the apparent incompatibility between sub-sections (4) and (6) of s.60 [section 84(3) and section 84(8)] with regard to paragraph (b) [section 83(b)] appeals on the one hand and the unjust enrichment defence provided for by paragraph 8(3) of Schedule 7 [section 80(3)] with regard to paragraph (l) [section 83(t)] appeals on the other…Mr Lasok [Counsel for HMRC] argues that the Judge was right in both respects and right too to reject Mr Barling QC's [Counsel for Cresta] reliance on two Tribunal decisions in the cognate field of VAT appeals. 7. I have not found this at all an easy point but in the end have concluded that Mr Barling is right and that s.59(1)(b)[section 83(b)] is not to be read as restrictively as Mr Lasok contends and the Judge below held. The argument has to be considered in a historical context. When initially VAT was introduced by the Finance Act 1972, the appeal provision, s.40, provided only for appealing the CCE's decisions with regard to the tax chargeable and the like, not for a specific restitutionary claim equivalent to that provided for under the IPT scheme by s.59(1)(l)[section 83(t)]. On its face s.40 appeared to contemplate appeals only by the taxpayer (i.e. the supplier of the relevant goods or services). In addition it contained provisions (now substantially re-enacted as sub-sections (3) and (8) of s.84 of the VAT Act 1994) equivalent to sub-sections (4) and (6) of s.60 of the Finance Act 1994 with regard to IPT. Nevertheless, despite those provisions, the VAT Tribunal in Processed Vegetable Growers Association Limited v CCE [1973] VATTR 87 and Williams & Glyn's Bank Limited v CCE [1974] VATTR 262 permitted appeals to be brought (a) by the recipient of the supplies (provided only that he had a sufficient interest) and not merely by the supplier, and (b) did so notwithstanding that the disputed tax had already been paid and accounted for to [HMRC]. In the second of the two cases it was held in addition that the [HMRC] were bound to give effect to the Tribunal's decision by repaying the tax to the (non-appellant) supplier (or allowing the supplier to take credit for it in his next tax return) whereupon the supplier would hold the monies so repaid or credited as constructive trustee for the appellant recipients. 8. Whether or not [HMRC] followed that approach with regard to repayment is unclear. What, however, is clear is that a practice developed whereby taxable persons recovered overpaid tax by using the machinery made available for correcting errors, a practice challenged by [HMRC] but ultimately vindicated by the House of Lords in CCE v Fine Art Developments PLC [1989] 1 AC 914. That decision proved to be the springboard for an amendment to the VAT legislation by way of s.24 of the Finance Act 1989 to introduce specific provision for the recovery of overpaid tax subject to a defence of unjust enrichment together with a related right of appeal. These provisions, substantially re-enacted, are now s.80 of the VAT Act 1994 (the equivalent of paragraph 8 of Schedule 7 of the Finance Act 1994 with regard to IPT), and s.83(t) of the VAT Act 1994 (equivalent to our section 59(1)(l)). 9. Against this background it would seem to me inappropriate to confine s.59(1)(b)[section 83(b)] to what Mr Lasok describes as "current, on-going or contemporaneous disputes" Which Mr Beal submitted was, in any event, how the current appeals should be described. unless there are compelling reasons to do so and unless the Court takes the view that the 1989 amendment to the VAT scheme operated to overturn the two longstanding Tribunal decisions. I recognise, of course, that the VAT scheme and the IPT scheme are not in all respects identical, but there appears to me no sound basis for contending that they should be construed and operated differently in the respects now at issue. 10. For my part I can see no compelling reason to confine paragraph (b) [section 83(b)] in the way Mr Lasok invites. True, the paragraph is couched in the present tense but, as I understand to be common ground, this has no temporal connotation: the words "is chargeable" here refer to the incidence of the tax which is "charged" on receipt of the premium by reference to the "chargeable amount". Mr Lasok's argument is rather that, once the tax has been paid (otherwise than under the provisions of s.60(4)[section 84(3)]), it will in any event be necessary for the taxpayer to claim its repayment so that any issue that might originally have arisen under paragraph (b) [section 83(b)] will now inevitably be subsumed in an appeal under paragraph (l) [section 83(t)]. In these circumstances a paragraph (b) [section 83(b)] appeal becomes, submits Mr Lasok, "futile", "of no utility", "wholly otiose". S.59(1)(b) [section 83(b)]) is simply not necessary and so should not be available for "historical disputes". 11. Generally speaking I have no doubt that this will be so. In Gil, for example - the "white goods" case also concerning the consequences of imposing differential rates of IPT, in which the Tribunal's judgment is currently awaited - the appeal to the Tribunal (which Richards J held on the merits to have been rightly not struck out - CCE v Gil Insurance [2000] STC 204) was brought (by the insurers) under paragraph (l) [section 83(t)] alone. But there may perhaps be other cases in which the taxpayer will wish to have some point of principle resolved before finally formulating his repayment claim or before deciding whether to involve himself in expensive unjust enrichment litigation. And if, say, the dispute arises whilst the tax at issue is still being charged (as it would have been here had the reviewed decisions been sought whilst the differential rates remained in force), and then the tax regime changes before the appeal is heard, it would seem quite wrong to have to discontinue an existing paragraph (b) [section 83(b)] appeal so as to replace it with a retrospective paragraph (l) [section 83(t)] appeal. How, one wonders, would that affect the taxpayer's rights to recover any tax paid under s.60(4) [section 84(3)]? 12. That brings me to the conundrum presented by the contrast between sub-sections (4) and (6) of s.60 [section 84(3) and (8)] which apply in a s.59(1)(b)[section 83(b)] case and the unjust enrichment defence available to the CCE [HMRC] in a repayment case. Various possible solutions were suggested to us. To my mind, however, it is unnecessary for present purposes to resolve this difficulty. If it were not regarded as insuperable in the two Tribunal cases in the 1970s, still less should it be so regarded here. After all, in a case like this, by definition the disputed tax will have been paid. 13. In short, I would hold that those affected by a [HMRC] ruling on the chargeability of tax are entitled to bring and maintain a paragraph (b) [section 83(b)] appeal irrespective of whether they or others have brought or are entitled to bring in addition an appeal under paragraph (l)[section 83(t)].”

“[27] It is clear that s 60(6) [section 84(8)] requires repayment of the tax found not to be due, together with interest, when the s 59(1)(b) [section 83(b)] mechanism is used, and nothing in those provisions makes the commissioners' obligation to repay subject to any defence of unjust enrichment. There is no reference to para 8(3) of Sch 7 [section 80(3)] if Parliament had intended this obligation to be subject to that defence, it would have so provided. But if that is right, then if the s 59(1)(b) [section 83(b)] mechanism could be used even when the tax had already been paid, it would provide an alternative for the taxpayer to a para 8 of Sch 7[section 80(3)] claim and an easy means of circumventing the unjust enrichment defence which might otherwise be available to the commissioners. [28] The response of Mr Barling QC, for the Airtours companies, to this difficulty was twofold. First, he contended that the s 60(6) [section 84(8)] obligation on the commissioners to repay only arises where the money has been paid or deposited 'in pursuance of' s 60(4) [section 84(3)] and that that would not be the case if it had been paid in the normal course of making quarterly returns. It was argued that s 60(6) [section 84(8)] only operates if the reason for the payment was in order to comply with s 60(4) [section 84(3)]. The fact that the terms of s 60(4) [section 84(3)] had been met would not be enough. [29] I find that unpersuasive. The object of s 60(4) [section 84(3)] is simply to ensure that the taxpayer's request for a decision as to whether or how much tax is chargeable does not become, through the review and appeal process, a device for delaying payment. Once payment has been made, irrespective of the taxpayer's motive, the precondition for an appeal set out in s 60(4) [section 84(3)] would have been met. That would then bring s 60(6) [section 84(8)] into play. There would be considerable practical difficulties in applying the interpretation suggested by Mr Barling, with its need for an investigation into the motive behind the payment. [30] The second response by [Cresta] to this dilemma was to argue that s 60(6) [section 84(8)] is in the statute only to provide for the payment of interest on sums found not to be due. On such a construction one might then be able to regard the obligation to repay as subject to para 8(3) of Sch 7 [section 80(3)], the unjust enrichment provision. Apart from the difficulties with such an argument already referred to earlier, the structure of s 60 [section 84] indicates that the point is not a good one. Section 60(6) [section 84(8)] has its counterparts in s 60(7) and (8), which provide for the payment by the taxpayer of amounts found to be due, together with interest. It seems impossible to confine the effect of these three provisions simply to the interest part of each of them. They create obligations as to payment of the capital sums as well. [31] It seems to me that there must be a clear distinction between the two regimes, that is to say, between s 59(1)(b) [section 83(b)] with its associated provisions in s 60(4) and (6) [section 84(3) and (8)] on the one hand and the restitutionary mechanism of para 8 of Sch 7 [section 80(3)], with the possibility of a review under s 59(1)(l) [section 83 (t)] on the other. The latter will apply where money has been paid by way of tax before there has been any decision by the commissioners on what is due. That will be a common situation, because normally this tax is paid by registered persons without the need for any decision by the commissioners. The former regime is there where the taxpayer seeks a decision from the commissioners before he pays the tax. Hence the need for s 60(4) and (6) [section 84(3) and (8)].”

“Section 83(1)(t) of the VAT Act 1994 gives a right of appeal against any decision we make in relation to a claim brought under section 80 of the VAT Act 1994… An appeal under this subsection will also, almost certainly, fall within section 83(1)(b).”

“… For present purposes in order for there to be an amount determined as repayable on an appeal there must be an amount which is identified within the scope of the appeal by reference to the decision under appeal i.e. the individual decision of HMRC and first of the taxpayer in a specific and identifiable amount. It is such a decision which must’ve been made and notified prior to 1 April 2009 in order for section 84(8) Interest to be payable.”

“61. HMRC rightly did not dispute that in light of Littlewoods CJEU where, as here, there has been an overpayment of VAT in consequence of the misapplication/misinterpretation of EU law the taxpayer has a right to be repaid the overpaid VAT with interest. The dispute between the parties centres on the amount of interest and in particular whether having received interest under s78 at the statutory rate of Bank of England base rate minus 1% the Appellant's EU law rights have been satisfied. 62. Resolution of that dispute is, in our view, to be found in Littlewoods SC. In our view the Supreme Court has clearly and unequivocally confirmed that where sums have been overpaid by way of VAT contrary to EU law an adequate indemnity must be provided through the payment of "some form" of interest (see paragraph 53) and that what represents an adequate indemnity or reasonable redress will fall within a range of possible outcomes (see paragraph 55). The Supreme Court has also confirmed that it is ultimately a question for Parliament to set the parameters by reference to which interest is payable and has done so through the enactment of s78 which provides for the payment of simple interest at the statutory rate (see paragraphs 34 and 54). Prior to its repeal s84(8) also provided a statutory route for interest to be payable at the discretion of the VDT/FTT in respect of sums determined as repayable to appellants who had been required to litigate a dispute whilst HMRC held disputed tax. In the period from 1 April 2009 and 1 January 2023 section 85A VATA provided an alternative vehicle for the payment of simple interest at the statutory rate. These provisions were noted by the Supreme Court as being part of the statutory infrastructure for providing an adequate indemnity (see paragraphs 38 and 39). 63. As we interpret the judgment in Littlewoods SC the Supreme Court was confirming that the statutory regime adopted by the UK principally through s78 but also s84(8) and, importantly, section 85A VATA meets the UK obligation under EU law to provide for an adequate indemnity and/or reasonable redress. 64. That conclusion closes out any asserted scope for a conforming interpretation.”

“98. We have also considered whether, to the extent that the decisions which post-date 1 April 2009 relate to prescribed accounting periods prior to that date, an inchoate right to interest had accrued. In this regard we have carefully considered the FTT judgment in Emblaze. 99. We have concluded that there was no such right. 100. In Emblaze the taxpayer had been given an appealable decision by which it was denied input tax credit to which it was entitled and it had appealed that decision. The inchoate or contingent right accrued "when HMRC wrongly refused to pay the amount of input tax claimed" (see paragraph 31 of the FTT judgment). The fact that the right was contingent on an appeal being brought and a positive judgment from the Tribunal requiring repayment of the VAT claimed did not preclude a conclusion that there was an inchoate right which was then protected by virtue of section 16 IA on the repeal of s84(8). 101. By contrast, in the present case the Appellant had overpaid the VAT in question period by period pre-dating 1 April 2009 but the inchoate right arising from such overpayment was the right to be repaid the tax with an adequate indemnity by way of statutory interest under s78. Further inchoate rights accrued to those who had overpaid VAT but who had received an appealable decision from HMRC prior to 1 April 2009 and in respect of which an appeal had been bought or the time limit for appeal was running. Those inchoate rights were protected by section 16 IA as per Emblaze. 102. For the reasons given at paragraph 96 such rights had not accrued to the Appellant regarding lines 18 - 20, 23 - 24 and 27(2). 103. Such rights did however accrue in respect of the decision in the Gaming Dispute at line 27(1). That appeal relates to HMRC's refusal of a section 80 claim (the Section 80 Objection is considered below), the appealable decision was issued prior to 1 April 2009 and an appeal was lodged in time and before 1 April 2009. The Appellant therefore had the inchoate right to invite the Tribunal to exercise its discretion to pay interest in the event that sums were repayable in the appeal. On or shortly before 20 April 2011 HMRC repaid sums due to the Appellant on the claims made. Without reference to the protective assessment the Appellant thereby succeeded in their appeal. We are therefore of the view that the Appellant's inchoate right to seek a direction for the payment of further interest had crystalised. There is no time limit by reference to which an application for additional interest must be made under s84(8). There is not even a requirement that the appeal remain live, though in this case the Tribunal's file on the line 27(1) appeal was never closed. It is therefore our view that the Appellant's invitation that the payment of further interest be directed in respect of the appeal at line 27(1) is not barred under the Post-1 April 2009 objection. We deal below with the broader implications for the payment of interest on that appeal. 104. For the reasons already stated above on the Adequacy issue we see no basis for applying a conforming interpretation as invited by the Appellant as the statutory provisions provide an adequate indemnity.”

“53. In the courts below, emphasis was placed on the CJEU’s use of the word “reimbursement” in para 25 when it speaks of the reimbursement of losses constituted by the unavailability of money. We do not attach such significance to a single word, considered in isolation. It is necessary to consider para 25 in the context of the judgment as a whole. In our view, consistently with the conclusion expressed in para 26, reimbursement of loss means no more than recompense or compensation, which is achieved through the payment of some form of interest. In relation to the principal sums, whether of tax, interest or penalties levied by the member state, the compensation would be full compensation in order to achieve restitution of those principal sums. But interest is a means of compensating a person for being kept out of his money. The measure of such compensation is not as straightforward as the calculation of the principal sums which must be repaid. The Court does not specify the level of the compensation for the unavailability of money which that interest is to provide. Instead, the CJEU confirms in this first part that there is an EU principle that a member state must repay with interest charges which it has levied in breach of EU law. It is in the second part that the CJEU lays down what EU law requires member states to provide by way of interest. 54. In the second part, which is paras 27 to 29, the CJEU restates the principle that it is for the internal order of each member state to lay down the conditions in which such interest must be paid. The member state is given a discretion both as to the interest rate and also as to the method of calculation, in particular whether it is simple or compound interest. That discretion is qualified by the established EU law principles of equivalence and effectiveness… 55. The phrase, “an adequate indemnity” has a less definitive meaning than “full reimbursement”

“…it is our view that our role is to apply the statutory provisions as drafted to the facts of the present case… However, and by reference to the conclusion in Littlewoods SC, we consider that the remedy provided under section 85A VATA and subsequently under section 102 FA 09 to be an adequate indemnity simply at a lower point in the range of possible but nevertheless adequate remedies.”

“…we consider it more appropriate to use the rate set in the settlement agreement agreed between these parties in respect of the Contents Dispute The Appellant considered base plus 1.5% an appropriate rate to apply in that context and that was a rate that HMRC considered to be reasonable in the event that there was a further delay in repayment of the overpaid tax in circumstances in which it might have been considered appropriate to apply a penal rate. We do not consider base plus 1.5% to be a penal rate in the context of the rates that the Appellant was paying at the time (as per the table at paragraph 33(7) the Appellant was paying 2.51% against a base rate of 0.5% i.e. a margin of 2.01%).”