The appeal concerned the question of whether a claim made by the appellant for repayment of overdeclared output tax in May 2007 was out of time to the extent that it related to the period ended April 2004. This required the tribunal to determine four issues of law: whether VATA 1994, s. 80(4ZA) should be disapplied by virtue of the principle of equivalence or equal treatment; whether s. 80(4ZA) should be disapplied by virtue of the principle of effectiveness; whether the claim was made pursuant to s. 80(1) or (1B); and how the limitation period was to be computed. The appellant carried on business as a health and fitness centre. On 31 May 2007, it submitted a claim pursuant to s. 80 in the sum of £140,153. The claim, which related to the three months ending 30 April 2004, was rejected by the commissioners on the basis that it was not made within three years of the end of the relevant accounting period in accordance with s. 80(4ZA).

On the first issue of equivalence, the appellant submitted that in reckoning the time-limits for a claim relating to output tax, it should be entitled to rely on the applicable time-limits governing claims for underclaimed input tax. It referred to the principle of equivalence considered in Marks & Spencer plc v C & E Commrs (Case C-62/00) [2002] BVC 622. In the appellant's view, there was no legitimate or objective reason for differentiating between the two measures. In relation to input tax, reg. 29 of the Value Added Tax Regulations 1995 (SI 1995/2518) provided that a claim must be made within three years of the date the return was required to be made, which would have brought its claim within the three-year time-limit had it applied equally to output tax. The tribunal found that the applicable legislation was s. 80(4ZA) and held that this provision did not fall foul of the principle of equivalence. The time-limit for both output tax and input tax was three years and the only change brought about by s. 80(4ZA) was the manner in which the time-limit was calculated.

The appellant submitted, on the issue of effectiveness, that the UK was in breach of Community law in the manner in which it reduced time-limits in respect of claims for output tax. The appellant's case concerned the curtailment of time-limits for making claims introduced in the Finance Act 2005 from three years commencing on the date of payment to three years from the end of the accounting period. The appellant contended that in the absence of a transitional period taxpayers should continue to be entitled to rely on the previous provisions. Furthermore, the appellant contended that the legislation was introduced with retrospective effect because the Act received Royal Assent on 25 June 2005 and yet the provisions were purported to be in force from 26 May 2005. In the appellant's view, the manner in which s. 80(4ZA) was implemented was contrary to the principle of effectiveness. The commissioners argued that the absence of a transitional period for s. 80(4ZA) did not contravene the principle of effectiveness. The tribunal agreed and held that the change introduced by s. 80(4ZA) was not to the period of limitation but in relation to how it should be calculated. That change of calculation did not make it excessively difficult or virtually impossible for the appellant to exercise a right confirmed by Community law. In any event, the changes only made a difference of one month. Had there been a transitional period it would have had to run for two years and two months in order to incorporate the appellant's claim.

The third issue of law for the tribunal was whether the appellant's claim was made pursuant to VATA 1994, s. 80(1) or (1B), since the relevant date for the making of the claim would be different for each. The appellant submitted that, as a payment-on-account trader, the payments it made were not specific to input tax or output tax, so the legislation prescribed that a claim must be submitted within three years of the date of overpayment. Accordingly, the tax, for these purposes, was paid on 31 May 2004 and the claim was submitted on 31 May 2007, within the three-year time-limit. It followed, in the appellant's view, that a payment-on-account trader cannot make a payment by way of output tax or input tax and that its rights to reclaim VAT must rest under s. 80(1B). The commissioners argued that the appellant's claim was made pursuant to s. 80(1) rather than s. 80(1B) as it related to the bringing to account as output tax of an amount that was not output tax due. This brought the claim into s. 80(1) and specifically excluded it from s. 80(1B). In the commissioners’ view, the appellant's claim could not be shoehorned into s. 80(1B) just because the liability was unknown at the time of payment. The tribunal held that the appellant's claim was made pursuant to s. 80(1) for the reasons argued by the commissioners. This specifically excluded the claim from s. 80(1B).

The last of the four issues was only relevant if the tribunal had found that the period of reckoning for the three years was from 31 May 2004. Since the claim was properly pursuant to s. 80(1), the tribunal did not consider it necessary to deal with this issue.

The tribunal dismissed the company's appeal.

1. Section 80(4ZA) should not be disapplied by virtue of the principle of equivalence.
2. Section 80(4ZA) should not be disapplied by virtue of the principle of effectiveness.
3. The appellant's claim was made pursuant to s. 80(1).
4. Whether or not the first day should be reckoned in a limitation period was not relevant to the appellant's claim as the limitation period had already expired.
5. The appellant's claim was made more than three years after the relevant date.

No. 20,648