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

The FTT addressed the Section 80 Objection, viz that the FTT had no jurisdiction to award section 84(8) Interest in respect of sums repaid following litigation of a section 80 VATA claim. The FTT referred to the decision of the Court of Appeal in C&E Commissioners v Cresta Holidays Ltd [2001] EWCA Civ 215 (“Cresta”), and to the earlier decision of the VAT and Duties Tribunal (“VDT”) in Williams & Glyn's Bank Ltd v CEC [1974] VATTR 262 (“Williams & Glyn's”), both of which we shall consider below, and said at FTT [128]:

“…[T]he Court [of Appeal] was comfortable that where sums had been paid to HMRC (or HMC&E) which, as a consequence of litigation, were determined not to have been due in the period prior to 27 July 1989 the predecessor provisions to section 84(8) VATA represented at least a vehicle for reimbursement and, in the case of an appeal bought by the recipient of a supply, the only mechanism by reference to which reimbursement would be secured (through the trust relationship identified in Williams & Glyn's).”

The FTT at FTT [132] also referred to the judgment of Lawrence Collins LJ sitting in the High Court in HMRC v Royal Society for the Prevention of Cruelty to Animals [2007] EWHC 422 (Ch) (“RSPCA”) where he said:

“... under s84(8) where on an appeal is it found that the whole or part of any amount paid by the trader is not due or the whole or part of any VAT credit is due to the trader has not been paid, then the amount found to not be due or not have been paid shall be repaid (or as the case may, paid) 'with interest at such rate as the tribunal may determine'..."

The FTT continued at FTT [134]-[137]:

“134.

It is our view that the apparent imprecision in the summary of s84(8) by Lawrence Collins LJ reflects the relevant provisions of section 84 VATA taken as a whole.  In the period prior to 1 April 2009 a taxpayer was required to have paid all VAT due generally and in respect of any amount determined by HMRC as due from them even where the amount was disputed.  Thus under 84(2) VATA they must have rendered and paid all their VAT returns and, under 84(3) VATA, have paid or deposited the amount determined by HMRC to be due in respect of: an output tax liability dispute (section 83(b)), an assessment to VAT (generally i.e. under declaration of output tax or over claim to input tax) (section 83(p)), a challenge to a the imposition of or assessment to various penalties or surcharges (section 83(n), (q) and (za)), and a requirement to make payment in consequence of a notice of joint and several liability (section 83(ra).

135.

In Emblaze (Footnote: ⁴) both at first instance and in the UT the language used to justify the payment of interest is that the taxpayer was "kept out of its money".  That too indicates to us that when interpreting the circumstances to which s84(8) applies it is to any circumstance in which a taxpayer is denied the use of money held by HMRC where it is then determined through litigation that the taxpayer was entitled to the money.

136.

We therefore consider that s84(8) is not restricted in the way HMRC contend and that it applies to any situation in which on an appeal it is determined that amounts have been paid to HMRC which were not due to them.  We consider that the reference to section 84(3) VATA does not preclude that conclusion given the history and historic application of the provision.

137.

In the context of an appeal against a section 80 VATA claim, HMRC have a prima facie liability to repay under that section but will not have done so, having rejected the claim and been prepared to litigate that position.  Accordingly, s84(8) imposes the mandatory obligation "shall be repaid" in all situations in which tax has been paid.  That is to be distinguished from a liability to repay more generally.”

At FTT [138]-[139] the FTT said:

“138.

Given our conclusion we do not need to consider whether the decision by the Appellant to pay the assessments raised in the Contents Dispute and subsequently to then make claims under section 80(1)/(1A) VATA in respect of them makes a difference.  Had we needed to do so we would have concluded that it did not make a difference.  As HMRC submitted the Appellant had the choice whether to pay and appeal the assessments or, as it chose to do, subsequently make claims against them.  We do not accept HMRC's veiled submission that such choice in some way abused the time limits for appeal against an assessment.  Section 80(1)/(1A) VATA (at the relevant time) provided for that administrative choice but, as HMRC submitted, there was in effect a jurisdictional choice and the Appellant would have had to abide by the choice it made, even though it may not have appreciated at the time the full ramifications of the choice.

139.

On that basis we conclude that the Section 80 Objection is ill founded and does not preclude our exercising our discretion to award interest in respect of appeals bought against a decision rejecting a section 80 VATA claim.”

At FTT [140]-[148] the FTT dealt with the issue whether the amounts which had been repaid were amounts “which the Commissioners have determined to be payable” within the meaning of section 84(3). The FTT concluded that the Commissioners had determined that the relevant amounts were payable. The FTT said:

“140.

In light of our conclusion as to the meaning of "paid" under s84(8) it is not strictly necessary for us to determine the answer to this question.  However, we do so for completeness and because, in our view, it even more clearly confirms that we have a discretion to direct the payment of additional interest.

141.

On the hypothesis that in order to have a discretion to pay interest the Appellant must show that the sums repaid were amounts paid pursuant to section 84(3) VATA i.e. they were amounts "which the Commissioners have determined as payable" in connection with an appeal inter alia under section 83(b) and which were thereby required to have been paid in order that the appeal be entertained.  We consider that plainly they were.

142.

As set out in paragraphs 11 to 29 above each of the Contents, Verandas, Bingo and Gaming Disputes concerned a question as to the liability to VAT of supplies made by the Appellant.  The Appellant had calculated its output tax liability and attributed the input tax incurred by it by reference to the provisions of VATA and by reference to guidance issued by HMRC.  In each case, by reference to the applicable statutory provisions, HMRC considered the supplies to be standard rated and the Appellant contended otherwise.  Claims were made and rejected and assessments issued and paid with claims made against those assessments entirely dependent on each party's respective positions as to the VAT properly chargeable on the supplies in question.

143.

We consider that in that context and by reference to the UT judgment in HBOS plc and others v HMRC [2023] UKUT 13 (TCC) (HBOS) sums accounted for by the Appellant (or paid on assessments) and subsequently reclaimed pursuant to section 80 VATA properly represent amounts determined as payable by HMRC in connection with a dispute brought under section 83(b).  As determined in Cresta there may be, and here was, a dispute falling within sections 83(b) and (t).

144.

HBOS concerned the interpretation of s78 and, in particular, whether the opening words: "where due to an error on the part of the Commissioners" was limited to an error by HMRC as a body or included a statutory error.  In that case, as here, the taxpayers had accounted for VAT to HMRC in accordance with the domestic statutory provisions.  In HBOS the statutory provisions precluded a claim to bad debt relief where there was a retention of title clause.  That restriction was subsequently held to be contrary to EU law.  Many years after the unrestricted entitlement to bad debt relief arose the taxpayer made claims to bad debt relief.  HMRC restricted the taxpayer's entitlement to interest under s78 on the repayments finally made to the period from the date of the claim to the date of repayment.  The FTT found the restriction of the period for which interest was payable to have been lawful on the basis that in the period prior to the claim, on the facts, bad debt relief had not been claimed in consequence of a statutory error which could not be considered to be an "error on the part of the Commissioners".

145.

At paragraphs 43 - 46 the UT determined that "error on the part of the Commissioners" necessarily included a statutory error as to conclude otherwise left a lacuna which would have precluded a taxpayer who had been held out of sums in consequence of a breach of EU law without remedy in interest and represented an outcome that cannot have been intended by Parliament.  The UT concluded:

"46.

In our view the above points do not mean that the words 'on the part of the Commissioners' deem HMRC to have enacted the non-compliant legislation.  Rather we consider that Parliament must have recognised when using those words that in so far as a statute concerns matters such as VAT which are within the collection and management powers of HMRC, HMRC is the relevant responsible state body.  HMRC's behaviour, whether in acting or omitting to act, will therefore inevitably reflect the requirements and stipulations of the relevant UK legislative provisions.  Behaviour on the part of HMRC (whether that is regarded as an act e.g. taking a payment, or an omission, e.g. failing to repay it) whose source is a provision of non-compliant statutory provision will clearly be something capable of fitting the words 'error on the part of the Commissioners'.  That being the case, in our view, whether one articulates the error in terms of the statutory error or the corresponding action or inaction on the part of HMRC should not, and does not, make a difference."

146.

In the same way as Parliament was interpreted as regarding an error on the part of the Commissioners to include a statutory error, we consider that VAT payable in accordance with the provisions of domestic law/HMRC's interpretation of it which results in an overpayment of VAT represents an amount "determined as payable by the Commissioners".   

147.

In order to make a claim under section 80 VATA the Appellant necessarily had to have paid the VAT in dispute, the sums were not repaid to them pending the outcome of the dispute, and it is that VAT which was then repaid to the Appellant after resolution of the litigation.    We therefore consider that the amount of tax so paid was an amount determined by HMRC as payable in connection with a dispute concerning the VAT chargeable on a supply which was necessarily paid in order that the appeal be entertained and within section 84(3) VATA.

148.

We therefore conclude that the Section 80 Objection does not preclude us from exercising our discretion to pay interest in respect of lines 9 - 17, 21 - 22 and 25 - 27(1) of Appendix 1.  The Section 80 Objection would not preclude the exercise of our discretion in respect of lines 18 - 20, 23 - 24 and 27(2) but for the reasons set out above our discretion is excluded by virtue of the Post-1 April 2009 Objection.”