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Greenwich Property Ltd, R (on the application of) v Customs & Excise [2001] EWHC Admin 230 (28th March, 2001)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2001/230.html
Cite as:
[2001] STC 618,
[2001] BTC 5158,
[2001] EWHC Admin 230,
[2001] NPC 67,
[2001] STI 631
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Queen on the application of GREENWICH PROPERTY LTD. v. COMMISSIONERS OF CUSTOMS & EXCISE [2001] EWHC Admin 230 (28th March, 2001)
Case No: 2950/2000
Neutral Citation Number: [2001] EWHC Admin 230
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Wednesday 28th March 2001
B e f o r e :
THE Hon MR JUSTICE COLLINS
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The Queen
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On the Application of
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GREENWICH PROPERTY LTD.
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Claimant
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v.
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THE COMMISSIONERS OF CUSTOMS &
EXCISE
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Defendant
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Mrs Penny HAMILTON (instructed by Stephenson Harwood for the
Claimant)
Mr Hugh McKAY (instructed by Solicitor for the Customs and
Excise)
Judgment
As Approved by the Court
Crown Copyright ©
MR JUSTICE COLLINS :
1. On 23 September 1998, the Commissioners of Customs and Excise (`the
Commissioners') decided to uphold an assessment that the Claimant was obliged
to account for Value Added Tax (VAT) in a total sum of about £210,000.
The assessment arose because the Commissioners decided that the claimant was
not entitled to benefit from a concession which it believed meant that it was
able to treat a supply as zero-rated. The delay in seeking judicial review of
that assessment is because the claimant initially appealed to a Value Added
Tax tribunal. But on 20 July 2000 the tribunal decided that there was no right
of appeal since the claimant's case depended on an extra-statutory concession
and it was "not within the jurisdiction of the tribunal, which is appellate in
nature, to review the Commissioners' application of the [concession] any more
than it is within our jurisdiction to review the Commissioners' `care and
management' powers, such as their conferring and withdrawing the benefits of
extra-statutory concessions". On 15 August 2000 this application for judicial
review was made. On 18 September 2000 Richards J granted permission to proceed
notwithstanding the delay since he was satisfied that there was a good reason
for it. Mr. McKay, who appeared before me on behalf of the Commissioners,
indicated that he did not propose to take any point based on delay.
2. The claimant asserts that it had a legitimate expectation in accordance with
the concession, whose terms it followed, that the relevant supply would be
treated as zero-rated and it would therefore be unfair and so unlawful for the
Commissioners to seek to claim the amount assessed. It relies in particular on
R v Customs and Excise Commissioners ex parte Kay [1996] S.T.C 15000 and
R v ITC ex parte MFK [1989] S.T.C. 873. In the alternative, it submits
that the Commissioners' decision was irrational in that they misunderstood and
so misapplied a decision of the VAT Tribunal in University of Bath v
Commissioners of Customs and Excise (1996 No. 14235) and failed to
appreciate that the arrangements made by the applicants did not fall outside
the concession
3. The claimant company is a wholly owned subsidiary of the University of
Greenwich. The University needed student accommodation. It decided to
construct what is described as a student village at Avery Hill. This was to
provide some 1300 bedrooms. The University itself paid for the development of
about one half of the complex in Phase 1. This cost some £10 million and
meant that the University had to pledge many of its teaching buildings in order
to enable the essential development to go ahead. It therefore decided to fund
Phase 2 in a different way by means of a Private Finance Initiative (PFI). PFI
providers were invited to submit proposals for the supply of 650 bedrooms and
ongoing facilities management for a period of 30 years at a price which would
result in the University at least breaking even.
4. It is not necessary for the purposes of this case to rehearse the other
requirements of the scheme in any detail. In due course, an arrangement was
made with Wimpey Developments Limited through its subsidiary, of which it was
guarantor, Avery Hill Developments Ltd (AHDL). The Principal Agreement, which
was entered into on 25 October 1995, provided that the University should grant
a lease of the relevant site at Avery Hill to the claimant. AHDL would
construct the student residences for the claimant. The residences were to be
maintained by AHDL for 30 years. The claimant would grant a lease of the newly
constructed buildings to the University. It was recognised that the buildings
would not be required for accommodation of students during the summer vacations
and so AHDL were to be able to exploit them for other uses during those
periods.
5. Before considering the relevant facts in more detail, I should set out the
statutory framework and identify the concession relied on. VAT is normally
chargeable on a supply of goods or services made by a taxable person, that is
to say, a person whose annual turnover is sufficient to require him to be
registered for VAT purposes. The taxable person can set off VAT he has paid on
supplies to him in connection with his taxable supplies. The simple case is
the wholesaler who purchases goods and then sells them on to a retailer. He
can set the tax he pays on acquiring the goods against that which he has to
charge the retailer and will pay the balance to the Commissioners. Naturally,
there will be other items he purchases in connection with his business which he
may also be able to set off in the same way. What he can set off is called
input.
6. Some supplies are exempt. No tax is chargeable and no input may be claimed.
Others are zero-rated. Again, no tax is chargeable, but the fiction is that
the supplies are taxable but the tax is nil. This means that input can be
claimed. There is thus a great advantage in being able to make a zero-rated as
opposed to an exempt supply.
7. Supplies which are zero-rated are identified in Schedule 8 to the Value
Added Tax Act 1994 as amended. Group 5 in Schedule 8 is headed `Construction
of Buildings etc.'. Item 1, so far as material, reads:-
"1. The first grant by a person -
(a) constructing a building -
(ii) intended for use solely for a relevant residential ... purpose
... of a major interest in, or in any part of, the building ... or its
site".
There follow notes which define and explain the terms set out in the items.
Note (4), so far as material, reads:-
"(4). Use for a relevant residential purpose means use as - ...
(d) residential accommodation for students...."
Note (12)(b) requires that, in order that the relevant supply shall qualify
under Group 5, before the supply is made the "person to whom it is made has
given to the person making it a certificate in such form as may be specified in
a notice published by the Commissioners stating that the ... supply ...
relates" to the building intended for the qualifying use. And Paragraph 1 of
Schedule 10 to the Act provides that if the use of the building is changed to a
non-qualifying use within 10 years, the zero-rating will be removed
retrospectively. The provisions are a little more complicated and cover uses
of parts of the building as well, but it is not necessary to go into more
detail. Schedule 9 to the Act deals with exempt supplies. Item 1 of Group 1
covers the grant of any interest in or right over land. There are many
qualifications but suffice it to say that, as will become clear when the scheme
devised by the claimant is considered, the relevant supply would, if not
zero-rated under group 5 of Schedule 8, have been exempt under Group 1 of
Schedule 9. If so, the input claimed on the basis of zero-rating would have
been wrongly claimed and so repayable to the Commissioners. Since the
Commissioners decided that the supply was exempt rather than zero-rated, the
assessment in question was made.
8. The difficulty arises because of the word `solely' in Item 1 of Group 5. No
university would want to be unable to turn its residential accommodation for
its students to profitable use during the vacation. Greenwich was no
exception. Thus it would be impossible to certify that the new building was
intended for use solely for accommodation for students if the provisions of the
Act applied with no modification.
9. The Commissioners, following discussions with the Committee of
Vice-Chancellors and Principals of the Universities of the United Kingdom
(CVCP), agreed to apply a concession which was contained in a document, known
as `the Concordat', issued by the CVCP, identifying concessions made by the
Commissioners and setting out guidelines the purpose of which was to `interpret
the law concerning VAT within the higher education context'. The Concordat is
dated 30 March 1990. It followed a letter from HM Customs and Excise to Mr.
Anderson-Evans, who was the senior administrative officer of CVCP dealing with
the matter, of 8 January 1990. Paragraph 6 of that letter reads:-
"That leaves the question of the issue of certificates. Higher education
institutions are in a peculiar position as they know that some use is likely to
be made of student accommodation for non-qualifying purposes during vacations
but such use is difficult to quantify. In the circumstances, because in any
event tax will be collected in respect of this non-qualifying vacation use and
provided that the new building is clearly intended primarily for use as student
accommodation for ten years from the date of its completion, then we are
content for higher education institutions to disregard the 10% de minimis rule
and to issue a certificate for the construction or acquisition of such a
building as "relevant residential" building under Group 8 of the zero-rated
schedule. Of course, where only part of a new building will qualify and part
will not, the certificate and accompanying plans must clearly indicate which
part or parts are entitled to relief and the 10% de minimis concession does not
apply in this respect."
10. This concession was set out in Paragraph 37a of the Concordat, which itself
is stated to contain detailed guidelines agreed with Customs and Excise. Mr.
McKay did not contend that the Concordat should be treated other than as a
document containing guidelines approved by the Commissioners. Any university
or higher education establishment was entitled to rely on a concession
contained in it, provided it complied with any conditions or prerequisites to
enable that concession to apply. Paragraph 37a reads, so far as material:-
"Zero-rating for the construction or acquisition of a new building for use as
student accommodation depends on the higher education institution being able to
issue a certificate to the builder or developer as set out in the VAT leaflet
on `Construction: VAT certificates for residential or charity buildings.
Higher education institutions may, on occasions be in some difficulty with
respect to issuing certificates as they know that some use is likely to be made
of student accommodation for non-qualifying purposes during vacations, e.g. the
letting of student accommodation for holiday use or for non-educational
conferences etc. but such use is difficult to quantify. In the circumstances,
because in any event tax will be collected in respect of this non-qualifying
use and provided that the new building is clearly intended primarily for use as
student accommodation for 10 years from the date of completion, then Customs
have agreed that higher education institutions may issue a certificate for the
construction or acquisition of such a building as a `relevant residential'
building. Where only part of a new building will qualify and part will not,
the certificate and accompanying plans must clearly indicate which part or
parts are entitled to relief.
A building or part of a building constructed for a qualifying residential
purpose must be used for that purpose for 10 years from the date of
construction in order to qualify for zero-rating. If, within that time, a
higher education institution disposes of all or part of that building for a
non-qualifying use or should its usage for any reason change, tax will be due.
The special rules governing such activities are explained in detail in the VAT
leaflet `Construction: VAT certificates for residential or charity
buildings'."
11. Pursuant to the Principal Agreement referred to in paragraph 4 above, on 25
October 1995 the University granted to the claimant a Ground Lease of the site
for a period of 125 years. Prior to making the arrangements in question, the
University had sought guidance from the Commissioners through Coopers and
Lybrands (as they then were) who were advising them. In a letter of 26 October
1994, Coopers and Lybrands explained that it was proposed that the University
should set up a subsidiary company wholly owned by it to which a ground lease
of the site would be granted at an amount reflecting its market value. The
subsidiary would then commission the construction of the building by a Wimpey
company under a contract which would `cover both the construction of the new
Phase IA and II buildings and the upkeep and maintenance of these buildings
during the next 25 years or so'. Wimpey would provide the funding for the
project and so payment under the construction and maintenance contract would be
spread over 25 years or so. Once the building was completed and fitted out,
the subsidiary would grant a major interest lease to the university. The
letter made the point that, as the only supply of the building that the
subsidiary would make would be zero-rated, the input that it incurred in
connection with the building would be referrable to that taxable supply and so,
as Customs and Excise had agreed, it would be recoverable in full.
12. On 10 January 1995 a Mr. Adams on behalf of HM Customs and Excise confirmed
that the construction and maintenance by the Wimpey company would be standard
rated but that so long as the lease issued by the subsidiary to the University
was granted for a single capital sum, that would be the consideration for one
zero-rated supply. This was because the building to be provided was to be
fully maintained over the period of 25 years or so. Mrs Hamilton correctly did
not seek to rely on this letter to prevent the Commissioners deciding to treat
the supply as exempt since she accepted that the whole of what was proposed, in
particular the arrangements for exploiting the vacation use, had not been put
to Mr. Adams. That was because they had not then been fully worked out.
13. On 26 September 1996 the University issued a certificate in reliance upon
the terms of Paragraph 37a of the Concordat to the claimant. It was signed by
Mr. Denton, who is Director of Finance for the University and who is a director
of the claimant company. The certificate accords with the relevant Notice
issued by the Commissioners and reads:-
"I certify that the information given above [viz: that the University would be
using the building at Avery Hill] is correct and complete. I also certify that
this organisation is to use this building as or identifiable parts of this
building solely for a qualifying purpose. I understand that if the building or
zero-rated parts of it is disposed of, let or otherwise used for a
non-qualifying purpose within the period of 10 years from the date of
completion a taxable supply will have been made and this organisation will
account for tax at the standard rate."
One of the problems of concessions is that they can lead to documents such as
this certificate which is and is known by all concerned to be inaccurate. The
building was not going to be used solely for a qualifying purpose.
Nonetheless, the Commissioners were content that such a certificate should be
issued provided that the concession referred to in Paragraph 37a was
applicable. It is a pity that the trenchant aphorism of Walton J in Vestey
v IRC [1979] 1 Ch. 177 at 197:
"One should be taxed by law, and not be untaxed by concession"
has not been heeded. Concessions lead not only to artificiality and false
documentation but also to arguments whether particular transactions fall within
them. The language of concession is not that of a statute and should not be
construed as if it was. But if a concession is published to all who might
benefit from it, they are entitled to arrange their affairs in reliance on it,
provided that what they do falls clearly within the terms of the concession.
As Bingham LJ said in a leading case relating to legitimate expectation arising
from concessions, R v IRC ex parte MFK (1989) S.T.C. 873 @ 892d:-
"The taxpayer's only legitimate expectation is, prima facie, that he will be
taxed according to statute, not concession or a wrong view of the law .... No
doubt a statement formally published by the Revenue to the world might safely
be regarded as binding subject to its terms, in any case falling clearly within
them."
14. On 27 September 1996, the claimant granted an underlease of the new
building to the University for a term of 125 years less 10 days in
consideration of the payment of the sum of £35,356,769. This was the
single supply (which contained a landlord's covenant to maintain and keep in
repair) which was zero-rated in accordance, as the parties believed, with
Paragraph 37a of the Concordat. On the same day, the University granted an
exclusive licence to AHDL `for third parties to hire the new buildings or parts
thereof' during the summer vacation. There were conditions attached to ensure
that only appropriate hirings should take place. Payment was to be
£66,921 indexed at the rate of 3% per year to be paid each year. That sum
was taxable at the standard rate.
15. In June 1998, Mr. Dean-Webb, who is described as a Tax Avoidance Visiting
Officer, concerned himself with the transactions and was particularly
interested `to examine the way in which AHDL had avoided charging VAT to the
claimant for the construction'. He paid visits to the University in October
1998 and sought advice from the Land and Property and the Construction VAT
Policy Divisions of Customs and Excise, but not, it would seem, from the
solicitors. It is remarkable that he did not in raising the question whether
the certificate should properly have been issued initially refer to the
Concordat but concluded, no doubt correctly but irrelevantly, that the
statutory provisions could not be met. The Concordat was then drawn to his
attention. He said that he understood that the concession only operated "where
the University itself hired out student rooms for holiday use...". He was told
that his understanding was correct and that principle was enshrined in the
University of Bath case.
16. Eventually, on 6 July 1999 Mr. Dean-Webb wrote to the claimant and to the
University stating that the certificate should not have been issued because the
University did not intend itself to provide the accommodation for use by others
than students in the summer vacation but had granted a licence to AHDL to
occupy the building. He also identified, as he believed, one element of the
composite supply which was not closely related to the supply of land, namely
postal services. However, that has not been pursued before me and I have not
had to go into it. The Commissioners have nailed their colours to the argument
that the University itself must make the student accommodation available in the
vacation in order to qualify for the concession. They also have argued that
what was happening was tax avoidance and so, even if there was a legitimate
expectation, the benefit should not be granted because of an over-riding public
interest. They relied on R v North and East Devon Health Authority ex p.
Coughlan [2000] 2 WLR 622. Finally, they submit that their construction
of the concession is not unreasonable and must therefore, since European VAT
law requires exceptions to tax to be narrowly drawn and construed, prevail.
17. On 14 July 1999 the assessment was raised. It was confirmed by a more
senior officer, Ms Watson, following a request for a review. An appeal to the
VAT and Duties Tribunal was dismissed on the ground that there was no
jurisdiction, since the tribunal could not review the exercise by the
Commissioners of their law and management powers. Hence the claim is before
me.
18. Since reliance has been placed on the Bath University case to
maintain that the concession only applies where the University itself deals
with the vacation hirings, it is necessary to see what it does decide. The
facts were, so far as material, these. The University had constructed some
buildings between 1965 and 1975 to be used as student accommodation. They were
refurbished in three separate phases and, once refurbished, were all available
for vacation letting. The University set up a company, University of Bath One
Ltd., to which it granted leases of the buildings. The issue was whether the
grant of those leases was a zero-rated supply. The leases and so the relevant
supplies were made by and not to the University. But, more importantly, no
certificate had been given by the University in accordance with Note 12. This
was because the concession in Paragraph 37a only applies where the university
can issue a certificate to the builder or developer for the construction or
acquisition of the relevant building. In the Bath case, this could not
be done since the buildings had been constructed by the University and the
refurbishment was what led to the possibility of vacation lettings and in any
event the wording of the concession presupposed a supply to and not by the
University. The issue was whether the supplies should be zero-rated because
the buildings were defined as dwellings within Item 1(a)(i). The only
reference to 1(a)(ii) appears at the end of the decision where it is said:-
"The facts [sc. Relating to Phase Three] are also the same with the exception
that the company undertakes all the lettings including third party lettings, so
that there is no question but that the intended use of these properties at the
time of the granting of the leases was not itself for a relevant residential
purpose".
Absent an attempt to rely on the concession, that was an inevitable finding.
19. Following the Bath University decision, CVCP queried with HM Customs
& Excise whether it affected the concession and were assured that it did
not. In a letter dated 20 September 1996, it was said:-
"The issue before the tribunal was the correct VAT liability of the supply of
the grant of the major interests in those buildings by the University to the
company. The tribunal found on the facts that this supply could not be
zero-rated as the buildings were not dwellings (certification would not be
required if they had been), or that the company could not issue a certificate
to the University for the zero-rating of these supplies because it was not able
to declare that the buildings were to be used solely for the relevant
residential purposes ..."
" As you will appreciate, the guidelines, in particular the concession in
Paragraph 37a, do not apply to anyone other than higher and further education
institutions themselves and thus the concession cannot be applied by the
subsidiary company in this case".
20. It will be apparent that the Bath case did not decide that the
University must itself make the lettings or hirings of the accommodation during
vacations. It merely decided that, in the absence of any attempt to use the
concession, there could not be compliance with Item 1(a)(ii) and perhaps that
the supply to be zero-rated had to be to and not by the University. Thus Mr.
Dean-Webb was incorrect when in the letter of 6 July 1999 to the University he
said:-
"...[T]he CVCP guidelines outlined above can only apply to supplies of
accommodation actually provided by the University itself. It cannot and does
not apply to situations where the entire premises are supplied by way of a
licence to occupy to a third party and that third party then makes supplies of
accommodation."
21. The purpose behind the concession was to enable the universities to make
profitable use of their student accommodation in vacations and still get the
benefit of zero-rating within Item 1(a)(ii). Thus `solely' meant in effect
`solely in term time'. This the University could certify with no difficulty
since it had the under-lease of the building. I asked Mr. McKay to explain the
difference in principle between the University itself making the vacation
arrangements and appointing a third party to make them. In each case, the
supplies or supply were standard rated and so VAT was paid. Mr. McKay was
unable to provide any satisfactory answer. He merely asserted that the
Commissioners do not want a third party to get the benefit of the zero-rating
and that there was a difference between the University making the arrangements
itself and handing over for a consideration the business opportunity to a third
party. I am bound to say that I cannot see that there is any distinction to be
drawn. There is certainly nothing in the language of Paragraph 37a to indicate
that the University cannot use a third party.
22. In R v Customs & Excise Commissioners ex parte Kay & Co Ltd.
[1996] S.T.C. 1500, Keene J had to consider an agreement between the
Commissioners and the professional organisations representing opticians
relating to repayment of VAT which had been overpaid. This said inter alia
that there was a 6 year period within which such claims could be submitted. An
attempt by the Commissioners unilaterally to reduce the period to 3 years was
declared to be unfair and an abuse of power. Keene J described the
representations in these words (at p.1527j - 1528a]:-
"[The representations] were made to organisations acting on behalf of the
taxable persons in the course of formal negotiations, and the Commissioners
were no doubt relieved that they could negotiate with such representative
bodies rather than have to do so with all the individual taxable persons
concerned. The agreement arrived at was a formal statement of the
Commissioners' position, intended to be brought to the attention of taxpayer
opticians and in my view to be relied on. This was an entirely different
situation from that which arose in the MFK case, where many of the
representations made by the Revenue had been made to people who were not acting
on behalf of the applicants in that case".
The situation here is similar. The Concordat contained guidelines which had
been approved by the Commissioners who must be taken to have known and intended
that the higher education establishments would act upon them. I have no doubt
that it would be unfair and so unlawful for the Commissioners not to apply the
concession contained in Paragraph 37a provided that the taxpayer has complied
with its terms.
23. I am prepared to accept that, since the Commissioners are relieving a
taxable person of a liability imposed by law (something they are empowered to
do by virtue of their `care and management' powers: see Customs & Excise
Commissioners v Arnold [1996] S.T.C. 127), the taxable person must
demonstrate that he has acted strictly in accordance with what the concession
permits and has complied with all the conditions necessary to obtain the
relief. Any doubt should be resolved in favour of the tax being payable
according to the statutory provision since, if there is doubt, or the language
of the concession is ambiguous, the taxpayer should inquire of the
Commissioners whether what he intends to do falls within the concession. But
the language in Paragraph 37a is unambiguous and the University clearly
complied with it.
24. Even so, submits Mr. McKay, the Commissioners are entitled to refuse to
apply it because the University was employing the concession as a means of
avoiding tax. This was, it is said, a tax avoidance scheme and accordingly
there was an overreaching justification for not giving the claimant the benefit
of the concession. Mr. McKay relies on R v North and East Devon Health
Authority ex parte Coughlan [2000] 2 WLR 622, a very important decision
of the Court of Appeal which establishes that a representation made by a public
body as to how it will behave in particular circumstances may give rise to an
enforceable right to the substantive benefits expected from the representation
made, since to frustrate that expectation would be so unfair as to amount to an
abuse of power. But in cases where such a substantive benefit can legitimately
be expected, the court:-
"has when necessary to determine whether there is a sufficient over-riding
interest to justify a departure from what has been previously promised ". (Page
645G).
25. Mr. McKay sought to rely on R v IRC ex parte Fulford-Dobson [1987]
S.T.C. 344. But there the concession relied on had expressly stated that it
must not be used for tax avoidance. There is no such stipulation here. In any
event, there has been no attempt to suggest that the scheme, albeit it has some
artificial elements, is one which falls within the principle established in
W T Ramsay Ltd., v IRC [1982] AC 300. Nor has it been submitted that
the approach now adopted by the House of Lords in MacNiven v Westmoreland
Investments Ltd. [2001] STC 237 is not applicable to VAT cases. At
p.256h in Paragraph 62 Lord Hoffmann said this:-
"My Lords, it has occasionally been said that the boundary of the
Ramsay principle can be defined by asking whether the taxpayer's actions
constituted (acceptable) tax mitigation or (unacceptable) tax avoidance. In
IRC v Willoughby [197] S.T.C. 995 at 1004, [1997] WLR 1071 at 1079
Lord Nolan described the concept of tax avoidance as `elusive'. In that case,
the House had to grapple with what it meant, or at any rate what its `hallmark'
was, because the statute expressly provided that certain provisions should not
apply if the taxpayer could show that he had not acted with `the purpose of
avoiding liability to taxation'. The same question arises on the
interpretation of the anti-avoidance provisions to which Lord Cooke referred in
IRC v McGuckian [1997] STC 908 at 921, [1997] NI 157 at 172. But
when the statutory provisions do not contain words like `avoidance' or
`mitigation', I do not think it helps to introduce them. The fact that steps
taken for the avoidance of tax are acceptable or unacceptable is the conclusion
at which one arrives by applying the statutory language to the facts of the
case. It is not a test for deciding whether it applies or not. If I may be
allowed to repeat what I sad in Norglen Ltd (in liquidation) v Reeds Rains
Prudential Ltd [1999] 2 AC 1 at 13 -14:
`If the question is whether a given transaction is such as to attract a
statutory benefit, such as a grant of assistance like legal aid, or a statutory
burden, such as income tax, I do not think that it promotes clarity of thought
to use terms like stratagem or device. The question is simply whether upon its
true construction, the statute applies to the transaction. Tax avoidance
schemes are perhaps the best example. They either work (Inland Revenue
Commissioners v Duke of Westminister [1936] AC 1) or they do not
(Furniss v Dawson [1984] AC 474). If they do not work, the reason, as
my noble and learned friend, Lord Steyn, pointed out in Inland Revenue
Commissioners v McGuckian [1997] 1 W.L.R. 91, 1000, is simply that upon the
true construction of the statute, the transaction which was designed to avoid
the charge to tax actually comes within it. It is not that the statute has a
penumbral sprit which strikes down devices or stratagems designed to avoid its
terms or exploit its loopholes'".
The Commissioners may not like the concession being used in this way to reduce
the amount of VAT otherwise payable by increasing input against a zero-rated
supply, but there is nothing in the language of the concession that prevents it
being done. The Commissioners could have made it clear, if they had wished,
that the University must make the arrangements itself and not as a third party.
They did not. There is no over-riding public interest that prevents a person
taking advantage of a concession to maximise the benefits he can legitimately
expect from its terms.
26. While I accept that exceptions to the accountability for VAT should be
narrowly construed in accordance with the principles of European Law, it has
not been argued that this requires an implication which disentitles the
claimant to the benefit it seeks or that the Maciven approach is
inapplicable.
27. In all the circumstances, I am satisfied that the Commissioners were not
entitled to raise the assessment and that the claimant was entitled to rely on
the concession. I will hear counsel on the precise form of relief.
© 2001 Crown Copyright