QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| THE QUEEN ON THE APPLICATION OF PREMIER FOODS (HOLDINGS) LTD
|- and -
|THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
|- and -
|Q COLD LTD (In Administration)
Mr George Peretz QC (instructed by Solicitor for HMRC) for the Defendant
The Interested Party was not represented
Hearing date: 29 April 2015
Crown Copyright ©
Mr Justice Supperstone :
The Legal Framework
(1) UK Law Mechanisms for Correcting Tax Improperly Paid
"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."
"It shall be a defence, in relation to a claim under this section by virtue of sub-section (1) or (1A) above that the crediting of an amount would unjustly enrich the claimant."
"6. Most VAT law is derived from one or more European Directives, but that is not true of the unjust enrichment defence. Nor, on the other hand, is it a purely domestic law concept. It is sanctioned by decisions of the Court of Justice of the European Communities (the Court of Justice) albeit that these decisions have not, for the most part, involved VAT itself. Thus in one of the earliest cases, Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82)  ECR 3595 (San Giorgio), the plaintiff was required to pay health inspection charges which were levied, contrary to Community law on the import of dairy products from other Member States. The Court of Justice reviewed earlier decisions, and said this:
'13. However, as the Court has also recognised in previous decisions… Community law does not prevent a national legal system from disallowing the repayment of charges which have been unduly levied where to do so would entail unjust enrichment of the recipients. There is nothing in Community law therefore to prevent courts from taking account, under their national law, of the fact that the unduly levied charges have been incorporated in the price of the goods and thus passed on to the purchasers. Thus national legislative provisions which prevent the reimbursement of taxes, charges and duties levied in breach of Community law cannot be regarded as contrary to Community law where it is established that the person required to pay such charges has actually passed them on to other persons.'
7. If the charges wrongly levied 'have been incorporated in the price of the goods and thus passed on to the purchasers', then it could unjustly enrich the undertaking which paid the charges to be reimbursed for their amount, on the assumption that the benefit of the repayment would not be passed on to the customers who bore their burden in the price paid. That is the basis for the defence. VAT is a tax whose burden is designed to be passed on, so as to be borne by the end user of the goods or services. It can readily be regarded as passed on to users who are registered for VAT and entitled to recover input tax on purchases, usually by way of set-off against the output tax for which they are accountable on their sales. The application of the concept of passing on in other cases requires careful consideration in relation to such a tax."
"18. … by way of exception to the principle of reimbursement of taxes incompatible with European Union law, repayment of a tax wrongly paid can be refused where it would entail unjust enrichment of the persons concerned. The protection of the rights so guaranteed by the legal order of the European Union does not require repayment of taxes, charges and duties levied in breach of European Union law where it is established that the person required to pay such charges has actually passed them on to other persons…
19. In such circumstances, the burden of the charge levied but not due has been borne not by the trader, but by the purchaser to whom the cost has been passed on. Therefore, to repay the trader the amount of the charge already received from the purchaser would be tantamount to paying him twice over, which may be described as unjust enrichment, whilst in no way remedying the consequences for the purchaser of the illegality of the charge…"
"73. Failure to make returns etc.
(1) Where a person has failed to make any returns required under this Act (or under any provision repealed by this Act) or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him.
(2) In any case where, for any prescribed accounting period, there has been paid or credited to any person—
(a) as being a repayment or refund of VAT, or
(b) as being due to him as a VAT credit,
an amount which ought not to have been so paid or credited, or which would not have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly."
(2) EU Law
"… in principle, a system such as the one at issue in the main proceedings in which, first, the supplier who has paid the VAT to the tax authorities in error may seek to be reimbursed and, second, the recipient of the services may bring a civil law action against that supplier for recovery of the sums paid but not due observes the principles of neutrality and effectiveness. Such a system enables the recipient who bore the tax invoiced in error to obtain reimbursement of the sums unduly paid."
"41. … If reimbursement of the VAT becomes impossible or excessively difficult, in particular in the case of the insolvency of the supplier, those principles may require that the recipient of the services to be able to address his application for reimbursement to the tax authorities directly. Thus, the member states must provide for the instruments and the detailed procedural rules necessary to enable the recipient of the services to recover the unduly invoiced tax in order to respect the principle of effectiveness.
42. The answer to the second part of the second question must therefore be that the principles of neutrality, effectiveness and non-discrimination do not preclude national legislation, such as that at issue in the main proceedings, according to which only the supplier may seek reimbursement of the sums unduly paid as VAT to the tax authorities and the recipient of the services may bring a civil law action against that supplier for recovery of the sums paid but not due. However, where reimbursement of the VAT would become impossible or excessively difficult, the member states must provide for the instruments necessary to enable that recipient to recover the unduly invoiced tax in order to respect the principle of effectiveness."
"The decision in Reemtsma is sufficient in itself to dispose of one of HMRC's original arguments (pressed more before the judge than before us) that not being the taxable party the investment trusts have no San Giorgio rights sufficient to give them a direct claim against HMRC for the recovery of the over-paid tax. The decision recognises that the end consumer, although not the taxpayer, has a sufficient economic connection with the payment of the tax to qualify for reimbursement under the San Giorgio principle."
The ITC decision is recognition by the Court of Appeal of the Reemtsma direct claim.
The Parties' Submissions and Discussion
"… In my opinion the test of enrichment will be satisfied where the amount claimed as overpaid VAT is repaid to the claimant, irrespective of the capacity in which he received that sum or of the obligations, if any, to which he has subjected himself in the event of its receipt.
In my opinion the critical issue where a claim is made under s.24 of the 1989 Act is whether the enrichment which will arise in these circumstances can be described as unjust. I consider however that this is a question of fact and degree which ought to be left to the decision of the tribunal, subject to review only where it can be shown that that decision was erroneous in point of law or on the facts was wholly unreasonable. In the present case the tribunal were of the opinion that there would be no unjust enrichment because there would not, due to the company's insolvency, be any benefit as a result of the repayment for the company and its shareholders.
It is clear on the agreed facts that the tenants will get something as a result of the repayment, which is better than nothing. It is also clear that there will be no benefit to the company or its shareholders, as the remainder must be shared equally with the other unsecured creditors. Those other unsecured creditors will receive a benefit which might be regarded, in their case, as a windfall. But that is inevitable if the tenants, who are entitled to claim repayment from the company, are to get anything at all."
i) An input tax assessment in respect of period 07/09 for £77273.00 issued on 15/08/13;
ii) An input tax assessment in respect of period 08/09 for £91881.00 issued on 15/08/13;
iii) An input tax assessment in respect of period 09/09 for £96791.00 issued on 07/11/13;
iv) An input tax assessment in respect of period 10/09 for £92249.00 issued on 07/11/13;
v) An input tax assessment in respect of period 11/09 for £110081.00 issued on 05/12/13;
vi) An input tax assessment in respect of period 12/09 for £70090.00 issued on 07/01/14;
vii) An input tax assessment in respect of period 01/10 to 12/12 for £3,127,817 issued on 18/02/14.