[2010] UKFTT 340 (TC)

TC00622

Appeal number: LON/2009/0487 

Refusal of claim for repayment of overpaid VAT – Whether repayment precluded by section 80 Value Added Tax Act 1994 – Yes – Appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	ELIZABETH DIANE YELLAND	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	JOHN BROOKS (TRIBUNAL JUDGE)							DAVID EARLE (MEMBER)						

Sitting in public at St Catherines House, Plymouth on 6 July 2010

Simon Pearce of S T Pearce Accountants for the Appellant

James Rivett, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This is an appeal by Mrs Elizabeth Diane Yelland (now Broomes) against a decision of the Respondents (“HMRC”) dated 30 January 2009 refusing a claim for repayment of an overpayment of VAT in the sum of £4,643.00.
2.	Mrs Broomes was represented by her accountant, Mr Simon Pearce and Mr James Rivett of counsel appeared on behalf of HMRC. 
Facts
3.	Although there was not an Agreed Statement of Facts and we heard no oral evidence the underlying facts, derived from the documents contained in the Appeal Bundle, were not disputed. 
4.	Mrs Broomes, a publican, ran the “Ship Inn” and was registered for VAT from 26 September 1997. In October 1998 she and her husband Mr Douglas Malcolm Yelland were divorced. Mrs Broomes then moved out of the “Ship Inn” and the business was transferred to Mr Yelland who, we were told, assumed responsibility for completing and submitting VAT Returns although Mrs Broomes continued to be registered for VAT. As no VAT return was submitted for the period ending 31 January 2004, on 12 March 2004 HMRC issued Mrs Broomes with an estimated assessment for that period, made to the “best of their judgment” in accordance with s. 73 Value Added Tax Act 1994 (“VATA”), in the sum of £4,643.00. 
5.	By a letter dated 2 April 2004, her solicitors gave an undertaking to pay £26,034.74 to HMRC out of the net proceeds of sale of the “Ship Inn”. This amount being the VAT outstanding as at that date which included the estimated assessment of £4,643.00 issued on 12 March 2004. A cheque for the full amount specified in the undertaking was sent by the solicitors with their letter to HMRC of 6 April 2004.
6.	In June 2004 an estimated assessment in the sum of £4,729.00 was issued to Mrs Broomes for the period ending 30 April 2004. However, further correspondence from HMRC sent to Mrs Broomes at the “Ship Inn” was returned to them. In 2008 HMRC located Mrs Broomes’ new address and an assessment was issued for the period to 31 July 2008 in which the VAT due was estimated at £81,611. Mrs Broomes then instructed accountants who wrote to HMRC on her behalf on 1 October 2008 to explain that she was no longer responsible for the “Ship Inn” as the business had been transferred to Mr Yelland following their divorce. 
7.	On 24 November 2008 Mrs Broomes submitted “nil” VAT returns for the periods ending 31 January 2004, 30 April 2004 and 31 July 2008 and the estimated assessments for these periods were adjusted accordingly. No difficulty arose as a result of the adjustments to the 30 April 2004 and 31 July 2008 assessments as payment had not been made by Mrs Broomes. However, on 29 November 2008 HMRC wrote to Mrs Broomes stating that the “payment of £4,643 [the VAT due under the estimated assessment for the period ended 31 January 2004] will not be repaid … as the return was rendered more than three years after the prescribed accounting period in which the assessment was made.”
8.	The decision not to repay the £4,643.00 was upheld following a review by HMRC and Mrs Broomes was notified by the letter dated 30 January 2009. On 10 February 2009 Mrs Broomes appealed against that decision. 
Law
9.	Regulation 25(1) of the Value Added Tax Regulations 1995 (the “Regulations”) requires every person who is registered for VAT to make a VAT Return. If a person has failed to make a VAT Return HMRC may assess the amount of VAT due from him “to the best of their judgment and notify it to him” (s. 73(1) VATA). Where an amount has been assessed and notified it is “deemed to be an amount of VAT due from him and may be recovered accordingly, unless, or except to the extent that, the assessment has been subsequently withdrawn or reduced” (s. 73(9) VATA). 
10.	Section 80 VATA, which so far as is relevant to this appeal, at the material time provided:
Credit for, or repayment of, overstated or overpaid VAT
…
(1A) Where the Commissioners—
(a) have assessed a person to VAT for a prescribed accounting period (wherever ended) and
(b) in doing so, have brought into account as output tax an amount that was not output tax due,
they shall be liable to credit the person with that amount.
…
(2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose.
…
(4) The Commissioners shall not be liable on a claim under this section—
(a) to credit an amount to a person under subsection (1) or (1A) above, or
(b) …
if the claim is made more than 3 years after the relevant date.
(4ZA) The relevant date is—
…
(c) in the case of a claim by virtue of subsection (1A) above in respect of an assessment issued on the basis of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;
(d) in the case of a claim by virtue of subsection (1A) above in any other case, the end of the prescribed accounting period in which the assessment was made.
11.	In this case the end of the prescribed accounting period in which the assessment (with which this appeal is concerned) was made was 30 April 2004 (s. 25(1) VATA and Regulation 25(1) of the Regulations).
Submissions
12.	Mr Rivett, for HMRC submitted the assessment of 12 March 2004 had been properly made and that if it had overstated her liability to VAT she had three years from 30 April 2004 to make a claim for repayment. He contended that as any claim for repayment under s. 80 VATA should have been made before 30 April 2007 the “nil” Return which was submitted of 24 November 2008 was out of time and HMRC were correct not to repay the £4,643.00 to Mrs Broomes as they were precluded by s. 80 VATA from doing so.
13.	For Mrs Broomes, Mr Pearce submitted that HMRC had been informed of the transfer of the business following her divorce by her solicitors who had failed to appreciate the estimated nature of the assessment when they gave the undertaking and that they had therefore paid the £4,643.00 to HMRC in error. In the circumstances he submitted that the time limits in s. 80 VATA were “not relevant” due to the lack of care and duty of HMRC who should have made the solicitors aware that the assessment for the period to 31 January 2004 was estimated.
Conclusion
14.	Although it may have been the case that this appeal would not have arisen if the solicitors acting for Mrs Broomes had been aware that she could have appealed against the estimated assessment or if Mrs Broomes had sought the advice of her accountants sooner than she did, this is not the issue before the Tribunal. The sole issue for us to determine is whether or not the claim for repayment of £4,643.00 was made within the three year time limit prescribed by s. 80 VATA which expired on 30 April 2008.  
15.	In the absence of any authority to the contrary we do not accept Mr Pearce’s submission that s. 80 VATA is not relevant to this appeal. Therefore, as the “nil” Return (which has been treated as a repayment claim by HMRC) was submitted on 24 November 2008 some 18 months after the expiry of the s. 80 VATA time limit we find that HMRC are not liable to repay the £4,643.00 to Mrs Broomes.
16.	Accordingly we dismiss the appeal 
Costs 
17.	Both parties sought costs if successful asking us to exercise our discretion to disapply rule 10 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (the “Rules”) under the paragraph 7(3)(a) of the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (the “Order”) and apply rule 29 of the Value Added Tax Tribunal Rules 1986 (the “1986 Rules”) as the appeal constitutes “current proceedings” which commenced before the Tribunal was established. 
18.	Having regard to the circumstances of this appeal, especially given that HMRC’s case confirming the decision not to make a repayment was clearly set out in their letter of 30 January 2009 to Mrs Broomes and that Mrs Broomes has had the benefit of professional advice from her accountant throughout the appeals process and to ensure that the proceedings are dealt with fairly and justly we disapply rule 10 of the Rules and apply rule 29 of 1986 Rules which were in force at the time the appeal was made.
19.	We therefore direct that the Appellant pays HMRC its costs of and incidental to and consequent upon the appeal to be assessed if not agreed.
20.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN BROOKS
TRIBUNAL JUDGE
RELEASE DATE: 15 July 2010