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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Addison v Customs and Excise [2004] UKVAT V18761 (09 September 2004) URL: http://www.bailii.org/uk/cases/UKVAT/2004/V18761.html Cite as: [2004] UKVAT V18761

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18761

Section 80 overpayment claim – no overpayment on facts – appeal dismissed

LONDON TRIBUNAL CENTRE

TERRENCE MICHAEL ADDISON Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: ADRIAN SHIPWRIGHT (Chairman)

RAY BATTERSBY

Sitting in public in London on 26 July 2004

The Appellant in person

Ms Caroline Neenan of Counsel for the Respondents

© CROWN COPYRIGHT 2004


 


DECISION

Introduction

1. This is an appeal by Terence Michael Addison ("the Appellant") against the decision of the Commissioners of Customs and Excise ("the Respondents") contained in a letter dated 11th April 2003 to refuse repayment of £2, 816.37. That amount was said by the Appellant to have been overpaid by him in the accounting period ending May 1988 and was claimed by him by way of 'voluntary disclosure'.

The Issue

2. The essential issue in this case is whether there was, in fact, an overpayment. If there was, a further issue arises as to whether the claim for repayment was out of time.

The Law

3. The relevant legislation is as follows
4. Section 80 VATA Recovery of overpaid VAT provides:

"(1) Where a person has (whether before or after the commencement of this Act) paid an amount to the Commissioners by way of VAT which was not VAT due to them, they shall be liable to repay the amount to him.

(2) The Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose.

(3) It shall be a defence, in relation to a claim under this section, that repayment of an amount would unjustly enrich the claimant.

(3A) Subsection (3B) below applies for the purposes of subsection (3) above where—

(a) there is an amount paid by way of VAT which (apart from subsection (3) above) would fall to be repaid under this section to any person ('the taxpayer'), and

(b) the whole or a part of the cost of the payment of that amount to the Commissioners has, for practical purposes, been borne by a person other than the taxpayer.

(3B) Where, in a case to which this subsection applies, loss or damage has been or may be incurred by the taxpayer as a result of mistaken assumptions made in his case about the operation of any VAT provisions, that loss or damage shall be disregarded, except to the extent of the quantified amount, in the making of any determination—

(a) of whether or to what extent the repayment of an amount to the taxpayer would enrich him; or

(b) of whether or to what extent any enrichment of the taxpayer would be unjust.

(3C) In subsection (3B) above —

"the quantified amount" means the amount (if any) which is shown by the taxpayer to constitute the amount that would appropriately compensate him for loss or damage shown by him to have resulted, for any business carried on by him, from the making of the mistaken assumptions; and

"VAT provisions" means the provisions of—

(a) any enactment, subordinate legislation or Community legislation (whether or not still in force) which relates to VAT or to any matter connected with VAT; or

(b) any notice published by the Commissioners under or for the purposes of any such enactment or subordinate legislation.]¹

(4) The Commissioners shall not be liable, on a claim made under this section, to repay any amount paid to them more than three years before the making of the claim.

(4A) Where—

(a) any amount has been paid, at any time on or after 18th July 1996, to any person by way of a repayment under this section, and

(b) the amount paid exceeded the Commissioners' repayment liability to that person at that time,

the Commissioners may, to the best of their judgement, assess the excess paid to that person and notify it to him.

(4B) For the purposes of subsection (4A) above the Commissioners' repayment liability to a person at any time is—

(a) in a case where any provision affecting the amount which they were liable to repay to that person at that time is subsequently deemed to have been in force at that time, the amount which the Commissioners are to be treated, in accordance with that provision, as having been liable at that time to repay to that person; and

(b) in any other case, the amount which they were liable at that time to repay to that person.

(4C) Subsections (2) to (8) of section 78A apply in the case of an assessment under subsection (4A) above as they apply in the case of an assessment under section 78A(1).

(5) ...

(6) A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases.

(7) Except as provided by this section, the Commissioners shall not be liable to repay an amount paid to them by way of VAT by virtue of the fact that it was not VAT due to them".

5. Paragraph 5 schedule 11 VATA Recovery of VAT, etc (formerly paragraph 6 Schedule 7 VATA 1983) provides:

"(1) VAT due from any person shall be recoverable as a debt due to the Crown.

(2) Where an invoice shows a supply of goods or services as taking place with VAT chargeable on it, there shall be recoverable from the person who issued the invoice an amount equal to that which is shown on the invoice as VAT or, if VAT is not separately shown, to so much of the total amount shown as payable as is to be taken as representing VAT on the supply.

(3) Sub-paragraph (2) above applies whether or not—

(a) the invoice is a VAT invoice issued in pursuance of paragraph 2(1) above; or

(b) the supply shown on the invoice actually takes or has taken place, or the amount shown as VAT, or any amount of VAT, is or was chargeable on the supply; or

(c) the person issuing the invoice is a taxable person;

and any sum recoverable from a person under the sub-paragraph shall, if it is in any case VAT be recoverable as such and shall otherwise be recoverable as a debt due to the Crown.

(4)–(10) ...".

6. Section 22 VATA 1983 which provides:

"(1) Where --

1. a person has supply goods or services for consideration in money and has accounted for unpaid tax on that supply; and

2. the person liable to pay any outstanding amount of consideration has become insolvent, then subject to subsection (two) and regulations made under subsection (3) below, the 1st mention person shall be entitled, or making a claim to the Commissioners, to a refund of the amount of tax chargeable by reference to the outstanding amount".

7. Regulation 38 of the 1995 Regulations which provides:

"(1) Subject to paragraph (1A) below, this regulation applies where—

(a) there is an increase in consideration for a supply, or

(b) there is a decrease in consideration for a supply,

which includes an amount of VAT and the increase or decrease occurs after the end of the prescribed accounting period in which the original supply took place.

(1A) Subject to paragraph (1B) below, this regulation does not apply to any increase or decrease in consideration which occurs more than 3 years after the end of the prescribed accounting period in which the original supply took place.

(1B) Paragraph (1A) above does not apply where—

(a) the increase or decrease takes place during a prescribed accounting period beginning before 1st May 1997; and

(b) the return for the prescribed accounting period in which effect is given to the increase or decrease in the business records of the taxable person has not been made, and was not required to have been made, before that date.

(2) Where this regulation applies, the taxable person shall adjust his VAT account in accordance with the provisions of this regulation.

(3) The maker of the supply shall—

(a) in the case of an increase in consideration, make a positive entry; or

(b) in the case of a decrease in consideration, make a negative entry,

for the relevant amount of VAT in the VAT payable portion of his VAT account.

(4) The recipient of the supply, if he is a taxable person, shall—

(a) in the case of an increase in consideration, make a positive entry; or

(b) in the case of a decrease in consideration, make a negative entry,

for the relevant amount of VAT in the VAT allowable portion of his VAT account.

(5) Every entry required by this regulation shall, except where paragraph (6) below applies, be made in that part of the VAT account which relates to the prescribed accounting period in which the increase or decrease is given effect in the business accounts of the taxable person.

(6) Any entry required by this regulation to be made in the VAT account of an insolvent person shall be made in that part of the VAT account which relates to the prescribed accounting period in which the supply was made or received.

(7) None of the circumstances to which this regulation applies is to be regarded as giving rise to any application of regulations 34 and 35."

8. Regulation 24 the 1995 regulations which provides (so far as is relevant):

"'increase in consideration' means an increase in consideration due on a supply made by taxable person which is evidenced by credit or debit note and any other documents having the same effect and 'decrease in consideration' is to be interpreted accordingly..."

9. A bundle of authorities was produced containing the following cases.

John Copson trading as Compressors & Air Equipment v CCE

Robin Seamon Brindley Macro v CCE

Freemans PLC v CCE [2001] STC 960

Marks & Spencer PLC and University of Sussex v CCE [2004] STC 1

CCE v General Motors Acceptance Corporation (UK) Plc [2004] STC 577

Evidence

10. Oral evidence was given by the Appellant.
11. A witness statements was provided for Linda Taylor, the Customs Officer who made the decision against which the appeal was made. This was accepted without objection in evidence.
12. The Appellant sought in the course of the hearing to introduce a witness statement of Christopher Gooding, who, at the time, was the assistant solicitor dealing with the litigation at Messrs Clyde & Co, solicitors. This was agreed to by the Respondent and the document was admitted.
13. The Appellant also sought to introduce a letter from Christopher Gooding dated 5^th July 1988. The respondent agreed to this on condition that this was the last document that the Appellant would seek to introduce that the hearing. The Appellant confirmed that this was the case and the document was admitted.

Facts

14. From the evidence before us we make the following findings of fact.

(a) Mr Addison, the Appellant, during the 1980s was an employee of Messrs W. S. Atkins. He became an independent management consultant specialising in the steel industry in January 1984. He registered for VAT in that month.

(b) Messrs W. S. Atkins had been retained to advise in relation to a shipping dispute as experts by Clyde & Co concerning the Cetra Cassiopeia.

(c) When he became an independent consultant the Appellant was retained by Clyde & Co to advise on consequential loss matters.

(d) No written evidence was produced of the terms of this engagement. It was accepted that this must have been an oral agreement referred to by the parties as a 'gentleman's agreement'.

(e) The Appellant was asked for and gave estimates of his fees at various times but these were estimates and not binding.

(f) The plaintiff won the shipping litigation and was awarded costs by the court.

(g) The Appellant issued an invoice dated 2 May 1988 for a total of £97, 812. 13 of which the consideration for the services rendered was £85,054.03and VAT at 15% (the relevant raise the time) was £12,758.10.

(h) This amount was included in the Appellant's VAT return for the period 5/88. Payment was made with the VAT return. The return and payment were both made in time.

(i) The plaintiff's costs were subject to taxation and the costs of Mr Addison's services were reduced from some £85,000 to some £76, 000 inclusive of VAT.

(j) The Appellant was paid the taxed amount which amounted to about £66,278.16 plus VAT in three tranches between June 1988 and July 1990. He has not been paid the balance. He has not chase that amount but hoped it will be paid.

(k) The Appellant asserted that he had been advised by the Local VAT Office that he did not need to issue a credit note in these circumstances but there was no evidence in support of such Local VAT Office advice and we make no finding in respect of it.

(l) No credit note was issued to Clyde and Co by the Appellant though one was prepared in 1996. We specifically find as a fact that no credit note was issued by the Appellant in respect of his invoice to Clyde & Co.

(m) On 27^th March 2003 the Appellant wrote to the Staines VAT Office making a claim for overpaid VAT relying on the European Court of Justice decision on the Marks & Spencer case.

(n) On 11^th April 2003 the Appellant was informed that the Marks & Spencer case is not applicable and that his claim in fact related to bad debt relief. This decision was confirmed in a letter dated 29^th July 2003.

15. In summary, we find as a fact that the Appellant invoiced Clyde & Coe for the full amount and has not reduced this amount by credit note or otherwise. Accordingly, the correct amount of VAT was paid at the correct time.

Contentions of the parties

16. The Appellant's contentions in his correspondence with the Inland Revenue and in the notice of appeal were essentially that "After the change in legislation in 1996 imposing a time-limit of three years to recover overpayments of VAT I was informed by my local VAT office that this would apply to an overpayment which I was proposing to rectify placing a credit note. I did not therefore issue the credit it did not recover the overpayment by making the appropriate adjustments my VAT return. When, following the Marks & Spencer judgement in July 2002 in the European Court, Customs and Excise announced that the immediate imposition from 1996 of the three-year limit was to be relaxed and invited claims repayment, I applied. My application has been refused. I am appealing because I do not think the Customs fully understand my claim and I do not agree with Customs interpretation of the legislation either now or when I was originally advised".
17. Before us during the hearing the Appellant made the following further submissions.

(a) The first VAT directive requires neutrality which overrides national law and therefore there is no need for a credit note.

(b) the contract was varied and the consideration reduced at some time after 5^th July 1988 . This was done orally.

18. Ms Neenan on behalf of the Respondents in summary submitted that:

i. There was no overpayments within the meaning of the VAT legislation:

ii. The appropriate remedy (if any) would have been bad debt relief which on the facts was unavailable;

iii. Accordingly the appeal should be dismissed.

19. Ms Neenan made the following more detailed submissions.

(a) the Appellant issued an invoice for £97, 812.13 which correctly showed the amounts of VAT due on that invoice namely £12,758.10.

(b) the amount of the consideration was not varied and there was no credit note issued.

(c) the amount due was the amount stated in the invoice which remained the amount due notwithstanding that a lesser sum had been paid.

(d) there was no evidence to show that there had been a waiver of the difference between the invoice to amount and the taxed amount. The letter referred to at paragraph 11 above is at best ambiguous and does not amount to a variation of the contract and is not a credit or debit eight.

(e) Bad debt relief is available in some circumstances. However the relevant rules were those contained in section 22 Value Added Tax Act 1983 which inter alia require that "the person liable to pay any outstanding amount of consideration has become insolvent" if the relief is to apply. This would require the insolvency of Clyde and Co to be shown which is not the case. Further by section 39 FA 1997 the appellant would now be out of time to make such claim

(f) Even if there were a variation of the contract (which is not admitted) Regulations 38 and 24 require a credit note or some other documents to evidence the position where there has been a reduction in the consideration.

(g) There is no evidence that the terms of the agreement engaging the Appellant's services included provision for a price reduction upon taxation costs.

(h) There was no agreement between Clyde & Co and the Appellant to vary the consideration. There was no meeting of minds between the parties as the such a variation. There was no payment of a lesser sum in full and final settlement.

(i) The Appellant was quite frank in saying the Appellant and Clyde & Co "may well have not agreed to different ideas" but the appellant lived in hope of getting the shortfall from the plaintiff. He maybe misunderstood what Mr Gooding was saying.

(j) Accordingly there was no overpayment and no bad debt and so no right repayment and even if there were (which is not admitted) the claim was out of time. The appeal should therefore be dismissed

Discussion

a. Was there an Overpayment?

20. We have found as a fact that the Appellant invoiced Clyde & Co for the full amount and has not reduced this amount by credit note or otherwise. The non issue of a credit note is a significant commercial fact and was solely the Appellant's responsibility.
21. The VAT that was charged in the invoice was for the correct amount. By virtue of what is now paragraph 5 Schedule 11 VATA that was the amount that was due and which was properly paid. There was accordingly no overpayment and so section 80 has no application.
22. There was no variation of the consideration such that Regulation 38 could apply. For the sake of completeness we record that conditions for bad debt relief were not fulfilled.
23. We find as a matter of fact and law that there was no overpayment or bad debt and so nothing to be repaid as VAT.

b. Was the claim in time?

24. In the light of our conclusion on the overpayment issue this issue does not arise the decision. However, in the circumstances if it did we were minded to decide that the claim had been made out of time. We are appreciative of the arguments put to us on this but would have liked to have had further argument on that issue had it been relevant before making a final decision on the matter. It seems to us that a claim made some 15 years after the event is out of time in the circumstances under consideration here.

Conclusion

25. We find as a fact that there was no overpayment of value added tax in the circumstances of this case. Accordingly, the Respondents were correct to refuse repayment of an amount that was properly due and was not an overpayment. The appeal is therefore dismiss. We make no order as to costs.
ADRIAN SHIPWRIGHT CHAIRMAN Release Date: 9 September 2004

LON/03/0981