The High Court granted an application by the taxpayer for a stay of its appeal against a decision of the VAT tribunal upholding Customs' refusal of its claim for repayment of input tax pending a decision of the European Court of Justice in similar cases.

Facts

The taxpayer was incorporated in 2001 and began dealing in mobile telephones in 2003. It reclaimed input tax in respect of 145 transactions. Customs rejected most of the claim in respect of more than £15,000,000 VAT on the ground that the purchases were part of a'carousel missing trader fraud', designed to obtain repayment of sums which had never been paid as output tax. The taxpayer's appeal to the VAT and Duties Tribunal was dismissed (Decision No. 18,939; [2005] BVC 4,062). The taxpayer appealed against that decision alleging that Customs had seriously breached the disclosure rules. The tribunal found that there had been a breach of the rules but refused to allow the appeal on the basis of non-compliance ('the rules appeal'). The taxpayer also made an appeal to the VAT tribunal in relation to Customs' conclusions on the facts ('the facts appeal').

The tribunal directed that the hearing of the facts appeal should be adjourned pending the decisions in similar carousel fraud cases which had been referred to the ECJ (Optigen Ltd and Fulcrum Trading Co (UK)Ltd (in liq.) [2003] BVC 2,518 (Decision Nos. 18,112 and 18,113) and Bond House Systems Ltd [2003] BVC 2,319 (Decision No. 18,100)).

The taxpayer applied to the court for a similar stay of the rules appeal on the basis that there would be wasted and unnecessary costs incurred if the present appeal went ahead. It argued that if its appeal succeeded but the ECJ reached a contrary conclusion, its appeal would have been brought under a false premise. If the ECJ decision was in its favour, the appeal would have had no purpose as the taxpayer could claim its tax refund in any event. Customs opposed the application.

Issue

Whether a stay of the appeal proceedings was justified.

Decision

Peter Smith J (granting the application) said that there was no advantage in the parties incurring costs on an appeal which might turn out to be purely academic. The court was faced with a one to two day appeal hearing which might result in costs of up to £100,000. There was no point in forcing the parties to incur such costs or in allowing taxpayers' money to be spent in such a manner. Accordingly, the rules appeal would be stayed pending the ECJ's decision in Optigen and Bond House and if the appeal subsequently went ahead it would be heard together with the facts appeal.

Chancery Division. Judgment delivered 13 October 2005.