UT-2024-000123 - [2025] UKUT 00360 (TCC)

The FTT considered the relevant statutory provisions under which it had power to direct the payment of additional interest. These provisions are complex because of the number of VAT periods involved in this appeal and involve successive versions of VAT legislation. We set out the FTT’s summary of the relevant statutory provisions at FTT [35]-[41], followed by the text of the relevant provisions:

“35.

The FTT was established with effect from 1 April 2009. Prior to that date disputes between HMRC (and prior to 2005 with HM Customs and Excise (HMCE )) and taxpayers in connection with VAT were litigated before the VDT.

36.

Both the VDT and the FTT have a jurisdiction defined by statute and not a general jurisdiction to determine disputes between taxpayers and HMRC. That jurisdiction is framed by reference to a list of "matters" in respect of which an appeal "shall lie" as prescribed initially in section 40(1) Finance Act 1972 (FA72) and subsequently in section 40(1) Value Added Tax Act 1983 ( VAT Act 83 ) and latterly section 83 VATA . Under FA72 and VAT Act 83 the statute specifically referenced a decision in respect of the listed matters; section 83 VATA excludes a reference to a "decision" though it remains at least implicit from the list of matters that there must be a decision "with respect to" one of the listed matters. Throughout the period from 1973 to 2011 the list of matters included:

"the VAT chargeable on the supply of any goods or services" ((c) in FA72 and (b) in VAT Act 83 and VATA)

"the amount of any input tax which may be credited to a person" ((d) in FA 72, (c) in VAT Act 83 and VATA)

"an assessment [to VAT raised pursuant to HMRC's power to assess to the best of their judgment where a taxpayer has failed to render a VAT return, or where a return is incorrect]" ((b) in FA72, (m) in VAT Act 83 and (p) in VATA)"

37.

From the implementation of VAT in 1973 through to 31 March 2009 it was a requirement (pursuant initially to section 40(2) FA72 and then section 40(2) VAT Act 83 and finally section 84(2) VATA ) that in order for an appeal to be entertained by the VDT a taxpayer was required to have made and paid all VAT returns which were required to be made. This provision was repealed with effect from 1 April 2009.

38.

It was a further (and remains a) requirement that no appeal be entertained by either the VDT or the FTT in respect of decisions regarding the VAT chargeable on a supply and assessments (and subsequently a wider class of matters 1 ) unless:

"the amount which the Commissioners have determined as payable has been paid or deposited with them; or on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that the amount has not been so paid or deposited" ( section 40(3) FA72, section 40(3) VAT Act 83 and section 84(3) VATA).

39.

In the period 1 April 1973 – 31 March 2009, section 40(4) FA72, section 40(4) VAT Act 83 and s84(8) then all relevantly provided:

"Where on an appeal under this section it is found:

(a)

that the whole or any part of any amount paid or deposited in pursuance of subsection (3) [be that of section 40 FA72, 40 VAT Act 83 or section 84 VATA] above is not due; or

(b)

that the whole or part of any [VAT credit] due to the appellant has not been paid

so much of that amount as is found not to be due or not to have been paid shall be repaid … with intertest at such rate as the tribunal may determine; …"

40.

That provision was repealed with effect from 1 April 2009 and section 85A was inserted into VATA . Until 31 December 2022, section 85A VATA provided for the payment of interest in the same circumstances as had been provided for under s84(8) but the discretion given to the tribunal to set the rate was removed and the rate was fixed by statute (Bank of England base rate minus 1%). Post 1 January 2023 the FTT no longer has the power to award interest but pursuant to section 102 Finance Act 2009 (FA 09) where an amount is repayable pursuant to section 85A VATA on a successful appeal there is a mandatory requirement for HMRC to pay interest at the statutory rate. The effect of section 102 FA 09 is therefore to provide for interest to be paid for the full period in which a taxpayer is out of pocket when the taxpayer is required to litigate a dispute leading to repayment in circumstances in which s78 interest may only be payable for part of the period.

41.

Despite the repeal of s84(8) it continued to provide a discretion to the FTT to award interest in accordance with the transitional provisions set out in Schedule 3 the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (TTFO). Schedule 3 prescribed the transitional arrangements to be applied to each permutation of situation in which HMRC had issued a decision in respect of which the previous jurisdiction of the VDT (or the General/Special Commissioners) may have been invoked. So far as relevant to the Appellant's application for interest it is to be noted that:

(1)

Paragraph 4 concerned decisions of HMRC of a type listed in section 83 VATA which had been made and notified, but which had not yet been appealed to the VDT. The provisions of VATA continued to apply to such decisions subject to the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ( Tribunal Rules ).

(2)

Paragraphs 6 and 7 provided for the continuation of proceedings commenced inter alia before the VDT prior to 1 April 2009, again subject to the Tribunal Rules.

(3)

Paragraph 9 concerned decisions of the VDT made before 1 April 2009 and provided explicitly for the continued application of s84(8).”

Section 83, as it stood immediately before the repeal of section 84(8) on 1 April 2009, provided as follows (as far as material):

“83.

Appeals

Subject to s.84, an appeal shall lie to a tribunal with respect to any of the following matters—

…

(b)

the VAT chargeable on the supply of any goods or services …

(p)

an assessment—

(i)

under s.73(1) or (2) in respect of a period for which the appellant has made a return under this Act; …

or the amount of such an assessment;..

(t)

a claim for the crediting or repayment of an amount under s.80, an assessment under subs.(4A) of that section or the amount of such an assessment; …”

Prior to 1 April 2009, section 84(1) to (3) provided:

“(1)

References in this section to an appeal are references to an appeal under section 83.

(2)

An appeal shall not be entertained unless the appellant has made all the returns which he was required to make under paragraph 2(1) of Schedule 11 and [...] has paid the amounts shown in those returns as payable by him.

(3)

Where the appeal is against a decision with respect to any of the matters mentioned in section 83[(b), (n), (p) or (q)] it shall not be entertained unless—

(a)

the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them; or

(b)

on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.”

Until 1 April 2009, section 84(8) provided:

For completeness, we should also set out the terms of section 80 as it stood from 19 March 1997 to 19 July 2005:

With effect from 20 July 2005, section 80 provided:

“80.— Credit for, or repayment of, overstated or overpaid VAT

(1)

Where a person—

(a)

has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and

(b)

in doing so, has brought into account as output tax an amount that was not output tax due,

the Commissioners shall be liable to credit the person with that amount.

(1A) Where the Commissioners—

(a)

have assessed a person to VAT for a prescribed accounting period (whenever ended), and

(b)

in doing so, have brought into account as output tax an amount that was not output tax due,

they shall be liable to credit the person with that amount…

(2)

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

(2A) Where—

(a)

as a result of a claim under this section by virtue of subsection (1) or (1A) an amount falls to be credited to a person, and

(b)

after setting any sums against it under or by virtue of this Act, some or all of that amount remains to his credit,

the Commissioners shall be liable to pay (or repay) to him so much of that amount as so remains.

(3)

It shall be a defence, in relation to a claim under this section by virtue of subsection (1) or (1A) above, that the crediting of an amount would unjustly enrich the claimant…

(4)

The Commissioners shall not be liable on a claim under this section—

(a)

to credit an amount to a person under subsection (1) or (1A) above …

if the claim is made more than 37 years after the relevant date…

(4A) Where—

(a)

an amount has been credited under subsection (1) or (1A) above to any person at any time on or after 26th May 2005, and

(b)

the amount so credited exceeded the amount which the Commissioners were liable at that time to credit to that person,

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

…

(7)

Except as provided by this section,  the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them.

On 1 April 2009, s. 84(8) was repealed, subject to transitional provisions in the Transfer of Tribunal Functions and Revenue and Customs Appeals Order, SI 2009 No 56 (the "TTF Order"). Schedule 3, paragraph 4 provides:

“(1)

This paragraph applies if, before the commencement date—

(a)

HMRC have notified a decision relating to a matter to which section 83 of the Value Added Tax Act 1994 applies, and

(b)

no party has served notice on a VAT and duties tribunal for the purpose of beginning proceedings before such a tribunal in relation to that decision.

(2)

On and after the commencement date, the following enactments continue to apply (subject to sub-paragraphs (3) and (4)) as they applied immediately before that date—

(a)

the Value Added Tax Act 1994,

(b)

rule 4(2) of the VAT Tribunals Rules 1986, and

(c)

any other enactments that are applicable to the decision.

(3)

Those enactments apply subject to Tribunal Procedure Rules.

(4)

Any reference to an existing tribunal is to be substituted with a reference to the tribunal.

(5)

Any time period which has started to run before the commencement date and has not expired will continue to apply.”

Paragraph 9 provides:

“(1)

This paragraph applies in relation to any decision of a VAT and duties tribunal made before the commencement date.

(2)

On and after that date, the following provisions continue to apply as they applied immediately before that date—

(a)

section 84(8) of the Value Added Tax Act 1994 (VAT),

[…]”

16.

Pursuant to paragraph 1(2):

“For the purposes of this Schedule there are “current proceedings” if, before the commencement date—

(a)

any party has served notice on an existing tribunal for the purpose of beginning proceedings before the existing tribunal, and

(b)

the existing tribunal has not concluded proceedings arising by virtue of that notice.”