Case No: A3/2016/1652
Neutral Citation Number: [2018] EWCA Civ 1106
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
The Hon Mr Justice Warren and Judge Colin Bishopp
[2016] UKUT 0090 (TCC)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18/05/2018
Before:

LORD JUSTICE MCFARLANE 
LORD JUSTICE FLOYD
and
LORD JUSTICE SALES

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Between:

	BRATT AUTOSERVICES COMPANY LIMITED	Appellant	
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	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS	
Respondent	

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Mr Andrew Hitchmough QC and Mr Ian Bridge (instructed by Fieldfisher LLP) for the Appellant
Mr Raymond Hill (instructed by The General Counsel and Solicitor to HM Revenue and Customs) for the Respondent

Hearing date: 1 May 2018

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Judgment
Lord Justice Floyd: 
1.	What are the requirements for a “claim” for an amount of overpaid VAT for the purposes of section 80 of the Value Added Tax Act 1994 (“the Act”)?  That is the issue which arises on this appeal.  The appeal is from a decision of the Upper Tribunal, Tax and Chancery Chamber (Warren J and Judge Bishopp, (“the UT”)) released on 19 February 2016 which allowed an appeal by HMRC from the decision of the First-tier Tribunal, Tax Chamber (Judge Berner, (“the FTT”)) released on 10 July 2014.  The UT decided that Bratt Auto Services Limited (“the taxpayer”) had not made a claim to recover an amount of overpaid VAT. Permission for the taxpayer to appeal further to this court was granted by Kitchin LJ on the papers on 15 July 2016.  
2.	Section 80 of the Act governs the crediting or repayment of output tax accounted for by a taxpayer which is not output tax due.  In the version in force on 30 March 2009, which is the relevant date for the purposes of this appeal, it provides as follows: 
“(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 … 
(2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose … 
(3) It shall be a defence, in relation to a claim under this section by virtue of subsection (1) … 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) … above … if the claim is made more than 3 years after the relevant date … 
(4ZA) the relevant date is - 
(a) in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection … 
(6) A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases. 
(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.” 
3.	The regulations to which section 80(6) refers are the Value Added Tax Regulations 1995 (SI 1995/2518) (“the VAT Regulations”). The relevant regulation (“regulation 37”), provides: 
“A claim under section 80 of the Act shall be made in writing to the Commissioners and shall, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.”
4.	The time limit of 3 years after “the end of the prescribed accounting period” specified by section 80(4) and (4ZA) for claims under section 80(1) which had been introduced by the Finance Act 1997 was held to be unlawful (in the absence of a reasonable transitional period) on the ground that it was incompatible with the EU law principles of effectiveness and legitimate expectation: see Fleming (trading as Bodycraft) v Revenue and Customs Commissioners [2008] STC 324.   The time limit was extended to 4 years with effect from 1 April  2009 by the Finance Act 2008, which also, by section 121, disapplied the time limit for claims made in respect of accounting periods ended before 4 December 2006 if a claim was made before 1 April 2009.  This resulted in many claims before the new deadline, some of them reaching back to the introduction of VAT.
5.	By a letter dated 30 March 2009, and thus two days before the end of the extended period introduced by section 121 of the 2008 Act, solicitors then acting for the taxpayer and an associated company purported to make a claim for the recovery of output tax said to have been incorrectly accounted for. The claims were founded upon two decisions of the Court of Justice of the European Union (as it now is) namely Elida Gibbs Ltd v Customs and Excise Commissioners (Case C-317/94) [1996] STC 1387 (“Elida Gibbs”) and European Commission v Italian Republic (Case C-45/95) [1997] STC 1062 (“Italian Republic”).  The details of these cases do not matter for the purposes of this appeal.
6.	The taxpayer’s March 2009 letter enclosed a copy of the taxpayer’s accounts for the year ended 31 December 1989.  It then explained, by reference to those accounts for that year, how the solicitors had arrived at a value of £1,293,750 for the taxpayer’s claim for repayment of overpaid VAT for that year, based on Elida Gibbs. The letter then went on to explain that it was believed that a claim could be calculated on a similar basis for each of the years when audited accounts were available, extrapolating the claim backwards over the period of trading.  The letter did not include such accounts, or any indication of what they would show.  The solicitors said that they understood that their client’s claim for a refund could extend back to 1973, although, as was later pointed out, 1973 would pre-date the taxpayer’s incorporation by some years. 
7.	HMRC rejected the purported claim on the grounds that it did not meet the statutory requirements. 
The FTT decision
8.	The matter came before the FTT as a preliminary issue.  Before the FTT, HMRC argued that the letter of 30 March 2009 did not constitute a claim because it did not refer to “prescribed accounting periods”. Judge Berner rejected this as a requirement for a claim: see paragraph [28].  Section 80(6) and regulation 37, in his judgment, defined exhaustively what was required for a claim, and those provisions did not leave room for any implied further requirement for the making of a claim.  There was therefore no requirement that it be made by reference to prescribed accounting periods.  Judge Berner also rejected an argument that the claim must contain enough for HMRC in due course to determine the claim: the requirements of a claim and the material necessary to determine it were not the same thing.  
9.	Judge Berner therefore allowed the taxpayer’s appeal in relation to the calendar year 1989 and all previous years back to 1973.  The failure to state an amount for these previous years was a matter which could be dealt with by amendment to the claim: see paragraph [38].
The UT decision
10.	In allowing HMRC’s appeal, the UT agreed (see [40]) that there was nothing in regulation 37 to support the view that a claim which relates to several accounting periods must be allocated to them individually.  However the UT considered that the requirement for allocation to individual prescribed periods came from section 80 itself.  At [41] the UT decided as follows:
“It is clear that sub-s (1) is directed at an amount for which the taxpayer has accounted as output tax but which was not output tax due for a single prescribed accounting period. It is impossible to read the subsection in any other way. Subsection (2) then provides for a claim for repayment of “an amount under this section”; we agree with [counsel for HMRC] that the “amount” referred to here must be the same “amount” as is mentioned in sub-s (1). Thus … the taxpayer must comply with sub-s 80(6) and reg 37 in respect of each period.” (emphasis supplied)
11.	The UT went on to express the view that it would be sufficient to say, if it be the case, that the same method of calculation applies to each prescribed accounting period. There would also, in the UT’s view, be no objection to a claim which arrived at a figure for a whole year and then apportioned it equally to the accounting periods within that year: see [41]. 
12.	The UT accepted HMRC’s argument that there was good reason for requiring a “claim” to be linked to prescribed accounting periods.  This was in part because it would allow the calculation of interest, but also because it would allow HMRC to determine whether the time limit for making the claim had expired.  As the time limit had to be calculated as a period from the end of the relevant accounting period, the UT “did not see how that can be possible if it is permissible to make a claim without allocating it to separate accounting periods”: see [42].  Having rejected the claim for the calendar year 1989, it followed that the claims for the earlier years could do no better (see [43]), and the UT accordingly allowed the appeal.
The appeal
13.	The taxpayer no longer complains about the rejection of its purported claim for years earlier than 1989. Insofar as the purported claim made by the letter date 30 March 2009 related to 1989, however, Mr Hitchmough QC, who appeared with Mr Ian Bridge for the taxpayer, submitted that the formal requirements of regulation 37 were complied with because the letter identified an amount and a method of calculation for the calendar year. Moreover the letter was clearly a claim by the taxpayer that it had accounted to HMRC for VAT and had brought into account an amount that was not output tax due.  Repayment should not therefore be denied simply on the basis, he submitted, that the claim had not been allocated on a period by period basis. 
14.	Mr Hitchmough accepted that a claim must relate to output tax accounted for in a prescribed accounting period.  Those words were present in subsection (1) to ensure that the claimant was a VAT registered trader. What the legislation did not do, however, was to prescribe what was to happen where a taxpayer had a claim which extended over several accounting periods.  
15.	Mr Hitchmough pointed to the fact that HMRC could allow amendments to claims (once made) of a quite extensive nature, for example by relying on documents which have come to light to adjust the amount claimed, or by refining methods of calculation. It was incorrect, so he submitted, to hold that the substantive requirements for a successful claim should all be in place at the outset.  The FTT had recognised this at [21] when it had said:
“The claim may be, but is not necessarily, the final answer; it is no more than a claim.  It will in many cases only be the start of a process during which further information will be provided and further analysis will be undertaken.  There is no warrant for the imposition of additional hurdles to those within reg 37.”
16.	Thus it was not sufficient to point to the fact that specifying the relevant prescribed periods might assist HMRC to decide whether a claim was out of time, or might enable them to calculate interest.  Those were all matters which could be worked out in answer to further enquiries by HMRC.  All that was required at the outset was sufficient particulars to enable HMRC “to engage with the claim”. 
17.	Mr Hill, who appeared for HMRC, supported the decision of the UT.  He submitted that the UT had arrived at the correct answer to the construction of section 80 and regulation 37, and that their construction accorded with the statutory purpose. The purpose of the provisions was to ensure that HMRC had enough information to engage with the claim but also to decide whether to accept it.
Discussion
18.	At the outset I note two matters.  Firstly, the notion that VAT is accounted for and paid by reference to prescribed accounting periods pervades the VAT legislation.  So, for example, section 25 of the Act provides:
“(1) A taxable person shall –
(a) in respect of supplies made by him, and
(b) in respect of the acquisition by him from other member States of any goods,
account for and pay VAT by reference to such periods (in this Act referred to as “prescribed accounting periods”) at such time and in such manner as may be determined by or under regulations and regulations may make different provision for different circumstances.
(2) Subject to the provisions of this section, he is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due to from him.
Many provisions in the Act beyond section 25 and 80 utilise the concept of the prescribed accounting period.  
19.	The second point to note is that prescribed accounting periods may be periods of three months or a quarter, or in some circumstances one month, all “ending on dates notified to the taxpayer”: see regulation 25(1) of the VAT Regulations.  A calendar period of a year is not therefore necessarily neatly divisible into 4 (or 12) equal accounting periods.   
20.	When considering the interpretation of section 80 of the Act and regulation 37, it is important to keep in mind what it is that each of the sub-sections does, and how they interrelate with each other and with the regulation.  Thus sub-section (1) imposes a liability on HMRC in certain specified circumstances, namely (a) where the taxpayer has accounted to HMRC for VAT “for a prescribed accounting period”, and (b) “in doing so” (i.e. in accounting to HMRC for VAT for a prescribed accounting period) the taxpayer has brought into account as output tax an amount that was not output tax due.  HMRC is liable, if those conditions are satisfied, to “credit the person with that amount”.  The “amount” of the credit is therefore the amount of output tax which was accounted for but not due in the prescribed accounting period.  
21.	Sub-section (2) makes it clear that HMRC are only to be liable to credit “an amount under this section” (i.e. the amount of output tax which was accounted for but not due in the prescribed accounting period) “on a claim being made for this purpose”.  “This purpose” must mean the purpose of establishing HMRC’s liability to credit the taxpayer with the amount of output tax which he has brought into account for a prescribed accounting period and which is not output tax due. 
22.	Sub-section (6) creates a power to make regulations for “a claim under this section”.  Clearly “a claim under this section” in sub-section (6) has the same meaning as it does in sub-section (2), namely a claim to establish HMRC’s liability to credit the taxpayer with the amount of output tax which he has brought into account for a prescribed accounting period which is not output tax due. 
23.	One then turns to regulation 37.  This provides, as one would expect, the requirements for a claim under section 80.  Those requirements are that the claim (a) be made in writing to the Commissioners; (b) be made by reference to such documentary evidence as is in the possession of the claimant; (c) state the amount of the claim; and (d) state the method by which that amount was calculated.
24.	It is true that regulation 37 does not, as the FTT held, expressly spell out the requirement that the claim must be made by reference to prescribed accounting periods, but it is clear in my judgment that such a requirement exists.  The power under section 80(6) to make regulations is only for “claims under this section”, and such claims can only be claims to establish HMRC’s liability to credit the taxpayer with the amount of output tax which he has brought into account for a prescribed accounting period which is not output tax due. The “claim” must therefore be made by reference to the prescribed accounting period, and the “amount” of the claim in question must be the amount of the credit claimed for that period.  
25.	The taxpayer’s construction of section 80 gives no effect to the words “for a prescribed accounting period” in section 80(1).  Mr Hitchmough submitted that they were there as part of the composite phrase “a person … has accounted to the Commissioners for VAT in a prescribed accounting period” so as to make it clear that that the person in question was a VAT registered trader as opposed, for example, to a customer.  I do not accept that argument.  For the purposes of indicating that a person was a VAT registered trader it would be sufficient to say that the person had accounted for VAT.  Nothing is added for that purpose by adding the words “for a prescribed accounting period”.  However, if HMRC’s construction is correct, those words provide the statutory basis for linking the claim to a unique date, which may have significance, for example, to whether the claim is made within the time limit prescribed by section 80(4), as I shall explain.  
26.	Mr Hitchmough placed reliance on Reed Employment v Revenue and Customs Commissioners [2013] UKUT 109, where one of the issues was the extent to which it was possible to amend a claim under section 80.  In the course of his decision at [29], Roth J observed that the formal requirements for submission of a claim were contained in regulation 37 and there were no further such requirements.  At [30] to [31] he said:
“30. There is no statutory definition of “claim” for the purpose of s. 80 that would provide a basis for distinguishing an amendment to an existing claim from a new claim…
31. In those circumstances, I consider that “claim” should here be given its ordinary meaning. In this context, it means a demand for repayment of overpaid tax. It may relate to one accounting period or many, to one particular supply or many, and to a part of the taxpayer’s business or the whole of its business. There is no reason, in my view, why any of these cannot constitute a self-standing claim.”
27.	I agree with Roth J that the formal requirements of a claim are those contained in regulation 37.  However, as I have explained, regulation 37 and section 80 have to be read together so as to give “claim” and “amount” a consistent meaning throughout.  A claim under section 80 is not any demand for repayment of overpaid tax, but is a demand for repayment of overpaid output tax for a prescribed accounting period which is not output tax due. Thus I would not agree that a claim under section 80 “may relate to one accounting period or many”.  A taxpayer may, in the same letter, raise a number of different claims, each by reference to an accounting period, but multiple such claims in the same letter are not, in my judgment, correctly referred to as a single claim under section 80.  That distinction did not matter for the purposes of Reed, but is of importance in the present appeal. In any event, Roth J did not go so far as to suggest that a claim could be made, as here, without reference to any accounting period at all. 
28.	I do not think that there is much to be derived from the fact that there are wide powers of amendment available to those who make a claim, as Roth J recognised in Reed.  The first question must be to determine the requirements imposed by the statute and the regulation.  It does not follow from the existence of a power to amend the amount, or its method of calculation, that the claim is not required to state an amount (in the defined sense) and a method of calculation at the outset. 
29.	I think that HMRC’s interpretation is supported by subsections (4) and (4ZA).  Those subsections set a time limit for “a claim under this section” which runs from “the relevant date”.  In the case of a claim made by virtue of subsection (1) the relevant date is “the end of the prescribed accounting period mentioned in that subsection” (subject to an exception in the case of an erroneous voluntary disclosure).  In connection with a claim made by virtue of subsection (1), the “prescribed accounting period mentioned in that subsection” is the accounting period in which the taxpayer accounted for an amount of output tax which was not output tax due.  It is therefore clear that subsection (4) is using the term “claim under this section” to refer to a claim in respect of a single accounting period, thus uniquely identifying the “relevant date”. The language of subsection (4) is not apt if a “claim under this section” could encompass more than one accounting period, and therefore more than one end of period. 
30.	Is this textual analysis supported by a consideration of the purpose of the provisions in question?  In Revenue & Customs Commissioners v General Motors (UK) Limited [2015] UKUT 605, the UT (Henderson J (as he was then) and Judge Sinfield) agreed at [81] with a submission by counsel for the taxpayer that regulation 37 was essentially administrative in nature, being designed to ensure that when a section 80 claim is made, it has “sufficient particularity for HMRC to engage with it and decide whether or not to accept it”.  This of course does not mean that the claim must at the outset be sufficiently particularised for HMRC there and then to decide it.  Nevertheless there is force in the suggestion made by HMRC that there would be a sound purpose in requiring identification of the period or periods in question, so that it would be possible to determine from the outset whether the whole or any part of it was out of time, or whether HMRC needed to go on and investigate it. 
31.	I agree with the UT that, if claims can be made other than by reference to prescribed accounting periods, then it would not be possible in some cases to determine without further investigation whether the whole or part of the “claim” was time barred.  Suppose that a “claim” is made for a one year period which falls either side of the date which is three years before the letter of claim.  The taxpayer says that he has accounted in that period for output tax which is not output tax due.  In order to engage with such a purported claim HMRC need to know on what side of the line the over-accounting of output tax occurred, because it is possible that some or all of it occurred in a prescribed accounting period which is time barred.  Mr Hill submits that this shows that the requirement to confine claims to individual accounting periods is not a pedantic technicality, but has a real purpose.  A limitation period which works by reference to the end of prescribed accounting periods cannot work unless claims are set out with reference to those periods.  Mr Hitchmough’s answer is that the question of precisely when the output tax was accounted for (when it should not have been) is an example of something which can be taken up by HMRC in their investigation of the claim. 
32.	I do not regard Mr Hitchmough’s answer as an adequate one, recognising as it does that there would indeed be a practical purpose in requiring the claim to be made by reference to an individual accounting period, so that it is possible to determine at the outset by reference to the end of that period whether it is in or out of time.  The significance of subsection (4) is that it provides the answer to the suggestion that the meanings which, together with the UT, I have ascribed to “claim” and “amount”, are unnecessarily pedantic, and to the extent that they prevent claims made by reference to longer periods, serve no useful purpose. 
33.	Running through Mr Hitchmough’s submissions was the suggestion that all that was missing, on HMRC’s case, from the letter of 30 March 2009 was an estimation of the amount for each of four prescribed periods and that this could be arrived at by dividing the amount for the calendar year by four.   It is certainly possible to imagine a case where the four accounting periods fell neatly into a year, and the overpayments were evenly spread through the year, so that it would possible to make such an estimate, but this will not always be the case.  As I have said, accounting periods do not necessarily coincide with the beginning and end of calendar years.  I do not see why this ability to make an estimate in some cases should force a different interpretation of the section.  Mr Hitchmough also gave the example of a taxpayer who mistakenly made his “claims” by reference to periods of one month, when he should have used three month periods, and suggested that it would be unjust if such a claim were to fail at the outset.  Mr Hill did not accept that such a claim would so fail, however, as he conceded that it would usually be apparent from the claim at the outset what the amounts for each prescribed period would be. I think Mr Hill is right, and so this example does not assist the taxpayer either.
34.	Although not properly characterised as pedantic, I would agree that HMRC’s construction is nevertheless a strict approach.  It is, however, one which is consistent with the overall structure of the VAT system, which is for VAT registered traders to account for and pay (or receive credit in relation to) VAT by reference to prescribed accounting periods, and one which serves an obvious purpose which can be derived from section 80 itself.   
35.	Mr Hill did rely on some further arguments in support of HMRC’s construction which were concerned with the rules relating to what items could be set off from a taxpayer’s claim for overpaid output tax.  These rules he contended were different as between sums which could be set off only in a given prescribed accounting period and those which were not limited to in-period set off.  These were not arguments which were developed before either of the specialist tribunals below or in the skeleton arguments before us.  They are not necessary given that one can see from section 80 itself that there is a good reason for requiring claims to be made by reference to specified accounting periods.  I therefore say nothing about them.  
36.	It was common ground that if HMRC were correct on the issue of construction of section 80 of the Act and regulation 37 then the taxpayer’s letter, which purported to make a claim in respect of an entire calendar year, did not meet the statutory requirements.  It made no attempt to allocate the total amount claimed into individual prescribed accounting periods, even on an estimated basis.    
37.	In summary, therefore, I agree with the UT that the taxpayer’s claim failed because it did not specify the amount claimed for any prescribed accounting period.  It follows that I would dismiss the appeal. 
Lord Justice Sales:
38.	I agree. 
Lord Justice McFarlane:
39.	I also agree.