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

Mr Moser KC, appearing with Mr Macnab for HMRC, submitted that the FTT had no jurisdiction to award interest under section 84(8) VATA in respect of the section 80 Appeals. The scheme of the legislation, Mr Moser submitted, was that section 84(8) provided a restitutionary remedy for repayment of principal and payment of interest only where appeals fall within section 84(3), i.e. where HMRC had compelled a trader to pay VAT rather than where a trader had self-assessed itself to the VAT in question. Where a trader had overpaid VAT section 80 represented the only and exclusive restitutionary remedy. Furthermore, there had to be a causal connection between the demand issued by HMRC and the payment in order to bring the appeal within the provisions of section 84(8).

The Company’s repayment claims, Mr Moser said, were made pursuant to section 80. Since 1 January 1990 (when the predecessor of section 80 – section 24 Finance Act 1989 – came into effect) section 80 was the exclusive remedy for obtaining a refund of over-declared and overpaid VAT from HMRC (Investment Trust Companies (in liquidation) v HMRC [2017] UKSC 29 (“Investment Trust Companies”) and Littlewoods Limited). An appeal against a refusal of a section 80 claim had to be made pursuant to section 83(t). Section 84(3) contained no reference to appeals against decisions in respect of matters mentioned in section 83(t) (i.e. section 80 claims). Instead, section 84(8) referred only to “any amount paid or deposited in pursuance of [section 84(3)]” and imposed an obligation on HMRC to repay “so much of that amount as is found not to be due.”

Therefore, Mr Moser contended, that because section 84(8) imposed no obligation on HMRC to repay overpaid principal in a successful section 83(t) appeal, it followed that section 84(8) imposed no obligation and gives no discretion to pay interest on that overpaid principal (FJ Chalke Ltd and another v HMRC [2009] EWHC 952 (Ch) at [70]).

Furthermore, Mr Moser submitted that the Company’s appeals were not against any decision with respect to any of the matters mentioned in section 83 (b), (n), (q), (ra) or (zb). In particular, the Company’s appeals were not against any decision of HMRC as to “the VAT chargeable on the supply of any goods or services” for the purposes of section 83(b). HMRC did not determine any amount to be payable as VAT by the Company within the meaning of section 84(3). Moreover, the Company did not pay or deposit any amount with HMRC in pursuance of section 84(3). Therefore, there was no relevant “amount” for the purposes of section 84 (8) in respect of which the FTT could award interest. Mr Moser also submitted that there was a discrete threshold jurisdictional condition in section 84(3) to pay to or deposit an amount of tax which HMRC had determined. Section 84(3) imposed no similar discrete threshold jurisdictional condition in relation to tax repayment claims under section 83 (t) appeals, since the tax would, by definition, have already been paid.

Therefore, Mr Moser submitted, section 84(8)(a) provided a specific restitutionary remedy as regards repayment of principal and payment of interest only where (1) HMRC had determined that an amount was payable as VAT, in the context of an appeal under section 84 (3), and (2) consequently, the trader paid or deposited that amount with HMRC as a condition of appealing i.e. the trader paid or deposited the VAT in pursuance of that determination.

Thus, Mr Moser contended that section 84(3) and section 84(8), on the one hand, addressed different situations from section 80(1) on the other, reflecting the fact that VAT was a self-assessed tax. Section 84(3) and section 84(8) concerned a situation where a taxable person has correctly accounted for and paid VAT and successfully resists (incorrect) enforcement action by HMRC. Section 80(1) concerns a situation where a taxable person, for whatever reason, accounted for and paid VAT that was not properly due (and who may have passed on the charge to its customers).

Mr Moser submitted that the FTT failed to appreciate that section 80 was the exclusive remedy for recovery of over-declared output tax, whether or not that over-declaration also caused the taxpayer to overpay VAT to HMRC. The FTT’s conclusion, Mr Moser contended, would result in a difference in treatment between (1) a “payment trader” who over-declares output tax and consequently overpays VAT to HMRC and (2) a “repayment trader” who over-declares VAT, but who does not pay VAT to HMRC, because his allowable input tax exceeds his output tax liability. The repayment trader claiming credit for over-declared output tax has, ex hypothesi, not paid or overpaid any sum to HMRC. The repayment trader’s claim cannot, therefore, fall within the scope of section 84 (3) since there would be no relevant amount that HMRC have determined to be payable as VAT and no question of the trader paying or depositing any sum with them. Further, section 84 (8) could not be engaged, because no sum has been paid, whether pursuant to section 84 (8) or otherwise.

In circumstances where the disputed tax had already been accounted for and paid to HMRC (in circumstances outside the scope of section 84(3), where HMRC had not determined the amount to be payable as VAT and the taxpayer had not paid or deposited that amount pursuant to the determination), Mr Moser argued that the conclusion of the Court of Appeal in Cresta was that the FTT (the successor to the VDT) was, necessarily, that the previous practice, either that outlined in Williams & Glyn's or Customs and Excise Commissioners v Fine Art Developments plc [1989] 1 AC 914 (Footnote: ⁷) (“Fine Art Developments”) did not survive the enactment of section 80. Moreover, the Supreme Court’s decisions in Littlewoods Limited and Investment Trust Companies made it clear that section 80 provided an exclusive remedy for recovery of over declared and overpaid VAT.