The Court of Appeal held that an industrial and provident society, was entitled to make a claim for repayment of VAT under VATA 1994, s. 80 where the benefit of such a claim had been transferred to it, along with the whole of the stock, property and other assets and all engagements of another society in consideration of paid-up shares in the taxpayer being issued to members of that other society.

Facts

In April 1995, the taxpayer took over the stock, property and other assets and all engagements of another industrial and provident society (Leicester). In June 1995, the taxpayer submitted two voluntary disclosures of overpaid VAT relating to the sale of demonstrator cars and to demonstrator bonuses in the aggregate amount of £101,547. Customs refused to pay any of the tax claimed so far as it related to amounts originally paid by Leicester prior to its transfer of engagements to the taxpayer.

The taxpayer appealed to the VAT tribunal arguing that it had succeeded to all of Leicester's rights and liabilities including the right to claim a refund of overpaid VAT. The tribunal dismissed the appeal, concluding that the taxpayer's argument that Leicester had transferred to it all of its assets and rights was attractive, as was the argument that if the taxpayer was unable to reclaim the overpaid VAT, the right to claim would be irretrievably lost. However, there was no provision in European or domestic law which allowed for the transfer of a right to reclaim an overpayment of VAT. Section 80(1) of VATA 1994 provided that Customs were not liable to repay tax except as provided by that section which provided only for repayment to the taxable person who made the overpayment (Decision No. 19,177; [2006] BVC 4,009).

Regulation 35 of the Value Added Tax Regulations 1995 (SI 1995/2518) permitted a taxable person to correct an error, but not an error made by someone else. An alternative argument of the taxpayer was that in some way it and Leicester were to be treated as if they were the same person. That was not possible. The tribunal noted the possibility that there might be a lacuna in the legislation but no provision had yet been made to cater for situations of the kind faced by the taxpayer.

The taxpayer appealed successfully to the High Court ([2007] EWHC 1432 (Ch); [2007] BTC 5685). Blackburne J held that, since there is nothing in the statutory code, either expressly or by necessary implication, to prevent a person who has a claim under s. 80 from passing that claim to another, the transfer of engagements between Leicester and the taxpayer was effective to transfer to the taxpayer the benefit of Leicester's claim under the section. It follows that the tribunal had reached the wrong conclusions. Customs appealed to the Court of Appeal.

Issue

Whether the taxpayer had any standing to make the repayment claim under VATA 1994, s. 80 since it was Leicester's transferee in respect of the latter's engagements.

Decision

Arden LJ (Wall and Wilson LJJ agreeing) (dismissing the appeal) said that the first question was what VATA 1994 had to contain in order to exclude the transfer of a right to repayment. The judge rightly approached the matter by asking whether there was anything in VATA 1994, express or implied, which prevented the assignment of such a claim. The Value Added Tax Act 1994 and the regulations thereunder took effect subject to the general law unless the general law was excluded. Under the general law, the right to a repayment of moneys overpaid to the Revenue was a chose in action. Under the general law, choses in action were assignable under s. 136 of the Law of Property Act 1925.

Customs had to show that there was some provision in the relevant statutory scheme which expressly or by implication precluded an assignment by operation of law of a claim for repayment under s. 80. There was no express legislative prohibition on assignment in the relevant provisions and none of them gave rise to the implication that the transfer of claims under s. 80 was not permitted in the circumstances of the case. The concluding words of s. 51(1) of the Industrial and Provident Societies Act 1965, ‘without any conveyance or assignment’, made it unnecessary for the parties to execute any document.

The statutory code allowed for certain successors to make claims in particular situations. Accordingly the words ‘to him’ in s. 80 had to include successors in those situations and included payment to an agent of the taxpayer ‘where an enactment refers to a person it is usually taken as intended to include that person's agent authorised expressly or by implication’ (Bennion, Statutory Interpretation, 4th edn, p. 984).

Likewise, where a statute referred to a person who had paid VAT, and gave him a right of repayment, the statute had to be taken, in the absence of contrary indication, to have intended to include a person in whom he had vested that right. The contrary indication would have to be clearly stated because the right to a repayment was a right of property which should not be restricted without clear wording. It would follow that if a person had assigned a chose in action to another so as to invest in him the right to sue for it, and to give a good receipt, Customs could not properly pay the assignor.

Customs further relied on the presence of the unjust enrichment defence in s. 80(3) arguing that they might find it difficult to establish that defence if a claim for repayment had been transferred. Thus the court should interpret s. 80 as prohibiting such assignments.

However, a claim to repayment brought by assignees would not necessarily give rise to a defence under s. 80(3). If it did, there were procedures in the tribunal for the summonsing of witnesses and disclosure of documents. The presence of the unjust enrichment defence was therefore not enough to exclude by implication the right of a person entitled to a claim for repayment to transfer it to someone else.

In connection with a defence of unjust enrichment, Part VA of the 1995 regulations provided a scheme of reimbursement arrangements. Where VAT had been charged to customers, received by the registered person and paid over to Customs so as to give rise to a claim under s. 80, the registered person could set up arrangements under reg. 43A to 43H in order to repay his customers who have been wrongly charged VAT and to pre-empt the unjust enrichment defence under s. 80(3).

However, those regulations did not assist on the issue before the court. They could not control the interpretation of s. 80. In any event, there was nothing in the regulations which prevented a registered person from assigning his right to repayment. It was to be presumed, unless otherwise stated, that a right which was created by statute was assignable under the general law in the same way as rights created by the general law, unless statute otherwise clearly provided. If the primary legislation did not prohibit an assignment, it was difficult to see what assistance one could get from the regulations. No reference had been made to any power in VATA 1994 to make regulations which would include the power to make regulations preventing the assignment of a claim which is assignable under the general law.

In all the circumstances, there was nothing to exclude the ordinary law to the effect that a claim under s. 80 might be assigned. In particular, it might form part of a statutory assignment of assets pursuant to s. 51(1) of the 1965 Act. There was nothing in s. 80 that provided conditions for assignment, for example for assignment at the direction of Customs, from which it might be concluded that assignment generally at the instance of the taxpayer was impliedly prohibited (Co-operative Group (CWS) Ltd v Stansell Ltd [2006] 1 WLR 1704 considered).

Court of Appeal (Civil Division).
Judgment delivered 1 April 2008.