The High Court held that the right to appeal to a tribunal with respect to the amount of any input tax which might be credited to a person under VATA 1994, s. 83(c) applied only where Customs had made a decision to refuse payment of input tax and such a decision was required before the tribunal could assume jurisdiction to hear an appeal.

Facts

The taxpayer company submitted its VAT returns for April and May 2006 seeking repayment of input tax in the sums of £1.8m and £3.13m respectively. Customs began an investigation as to whether the repayments should be made and the taxpayer issued notices of appeal on the basis that Customs' failure to notify it of their decision was appealable under VATA 1994, s. 83(c).

Customs applied to the VAT tribunal to strike out the two appeals on the ground that the tribunal lacked jurisdiction to entertain them. The taxpayer submitted that a repayment was undoubtedly due, having been properly sought and vouched for and the taxpayer had no knowledge that its purchases might have been tainted by fraud. It argued that Customs were delaying unreasonably in making repayment, and that the taxpayer was suffering hardship in consequence.

Customs produced a letter showing that the repayment claim was under continuing review in the context of ‘transaction chains’ involving defaulting traders but the taxpayer submitted that it was unsatisfactory that the continuation of enquiries was open-ended in such a way that it was not clear when they might be regarded as having come to a conclusion.

In the case of PNC Telecom plc v R & C Commrs (not yet reported, September 2006), the VAT tribunal had regarded it as less than satisfactory that Customs could take their time over the investigations without any control by the tribunal, when a taxpayer wanted to appeal. However it felt constrained to strike out the appeal in that case, holding that the appeal could not be entertained until it might be known whether Customs were in fact disallowing the input tax deduction.

In the present case, the tribunal considered that the ratio of the tribunal's ruling appeared to be that it did not consider that one could have a dispute about the ‘matter’ of the amount of input tax, within VATA 1994, s. 83(c), until the outcome of Customs' investigations was known; they might after their investigation conclude that the taxpayer did not know and should not have known about any fraud – or it might be that there was no fraud.

However the tribunal in the present case took the view that the reason given in PNC for not entertaining an appeal of this kind meant that an excessively restrictive interpretation had been placed on the scope of s. 83(c), since that provision did not make it a requirement that, in order to ground an appeal, it should be clear at the outset how much input tax each party said should be credited to a taxpayer; it simply provided that an appeal should lie to a tribunal with respect to the amount of any input tax which might be credited. It followed in the tribunal's opinion that, at the time the notice of appeal was served, it was imarlrlie.n ldTesvh aetno pt auwlrlphooewsth ete hore f C raeuncs ltaaopimmpse aihnla ofduf lftlih,n iaisnl l kypi anmrdta, wdoear sun ptoh tta hatetir they should be required to take up a position with regard to the reclaim, so that the tribunal could then decide between the parties. Therefore the tribunal dismissed the applications to strike out the two appeals Mobilx Ltd Decision No. 19,966, 6 October 2006). Customs appealed. After the decision of the tribunal, Customs reached a stage in their investigation where they had felt able to make, and had made, a decision refusing the taxpayer's claims for repayment. Therefore the taxpayer could bring an appeal against that decision to the tribunal. In the light of that decision, the taxpayer saw no need for the appeal to proceed and so did not appear and was not represented at the hearing.

Issue

Whether VATA 1994, s. 83(c) required a decision to be made by Customs which was the subject matter of an appeal or whether there was some more general power exercisable whenever there was some sort of issue between Customs and a taxpayer.

Decision

Warren J (allowing the appeal) said that in the light of the decision of Lindsay J in Touchwood Services Ltd v R & C Commrs [2007] EWHC 105 (Ch), it was clear that s. 83(c) applied only where there had been a decision by Customs to refuse repayment of input tax in circumstances such as the present case. If it was asserted that Customs had delayed unreasonably in making a decision, that was not a matter which could be adjudicated upon through the statutory appeals procedure but was, at least unless and until the law was changed, a matter of judicial review. That might well not be regarded as a sensible or desirable route by which to challenge delay in the context of claims for repayment of VAT; but it was the route which was available whereas the statutory appeal route was not. There had been no relevant decision in the present case before the relevant purported appeals were issued. The fact that decisions had now been made meant that the taxpayer now had a right to appeal those decisions but that the current purported appeals, as they stood, could not be adjudicated on by the tribunal (Marks & Spencer plc [1998] BVC 2,096 and Tricell UK Ltd Decision No. 18,127) [2003] BVC 4,116 considered).