Strand, London, WC2A 2LL
B e f o r e :
|Case No: HC08C03780|
|(1) Littlewoods Retail Limited
(2) Shop Direct Home Shopping Limited (formerly Littlewoods Shop Direct Home Shopping Limited)
(3) Reality Group Limited
(4) Shop Direct Group (formerly Shop Direct Group Limited)
(5) Shop Direct Limited
|- and -
|The Commissioners for Her Majesty's Revenue and Customs
|Case No: HC08C03781|
|And Between :
|(1) Littlewoods Limited
(2) Brian Mills Limited
(3) Burlington Warehouses Limited
(4) Janet Frazer Limited
(3) John Moores Home Shopping Service Limited
(6) Littlewoods Warehouses Limited
(7) Peter Craig Limited
(8) Littlewoods Retail Limited
(9) Reality Group Limited
(10) Shop Direct Group
(11) Kay and Company Limited
(12) Abound Limited
|- and -
|The Commissioners for Her Majesty's Revenue and Customs
Mr Jonathan Swift QC, Mr Andrew Macnab, Mr Peter Mantle, and Mr Imran Afzal (instructed by Solicitors for HM Revenue & Customs) for the Defendants
Hearing dates: 1-2 November 2010
Crown Copyright ©
Mr Justice Vos:
i) Which of the questions proposed in the Judgment should actually be referred?
ii) The precise form of the reference.
iii) Whether there should be an immediate declaration on issue 1, and whether Littlewoods should be granted permission to appeal issue 1.
Which of the questions proposed in the Judgment should actually be referred?
The precise form of the reference
Whether there should be an immediate declaration on issue 1, and whether Littlewoods should be granted permission to appeal issue 1?
UPON these actions being called on for trial
AND UPON HEARING Leading and Junior Counsel for the Claimants and Leading and Junior Counsel for the Defendants
IT IS DECLARED that that Claimants' claims are, as a matter of English law and without reference to EU law, excluded by sections 78 and 80 of the Value Added Tax Act 1994.
IT IS ORDERED
(a) this Order and the accompanying Schedule
(b) the statements of case filed by all parties in claims HC08C03780 and HC08C03781;
(c) the judgment handed down on 19 May 2010; and
(d) a bundle of the relevant national legislation referred to in the Schedule hereto, as currently in force;
(a) the issue whether the payments alleged to have been made by mistake were indeed so made;
(b) the issue whether the mistake claims were time barred; and
(c) the issues whether the Defendants were entitled to defences of change of position and exhaustion of benefits;
be stood over to be dealt with after final judgment in these actions.
Where a taxable person has overpaid VAT which was collected by the Member State contrary to the requirements of EU VAT legislation, does the remedy provided by a Member State accord with EU law if that remedy provides only for (a) reimbursement of the principal sums overpaid, and (b) simple interest on those sums in accordance with national legislation, such as section 78 of the Value Added Tax Act 1994?
If not, does EU law require that the remedy provided by a Member State should provide for (a) reimbursement of the principal sums overpaid, and (b) payment of compound interest as the measure of the use value of the sums overpaid in the hands of the Member State and/or the loss of the use value of the money in the hands of the taxpayer?
If the answer to both questions 1 and 2 is in the negative, what must the remedy that EU law requires the Member State to provide include, in addition to reimbursement of the principal sums overpaid, in respect of the use value of the overpayment and/or interest?
If the answer to question 1 is in the negative, does the EU law principle of effectiveness require a Member State to disapply national law restrictions (such as sections 78 and 80 of the Value Added Tax Act 1994) on any domestic claims or remedies that would otherwise be available to the taxable person to vindicate the EU law right established in the Court of Justice's answer to the first 3 questions, or can the principle of effectiveness be satisfied if the national court disapplies such restrictions only in respect of one of these domestic claims or remedies?
What other principles should guide the national court in giving effect to this EU law right so as to accord with the EU law principle of effectiveness?
PROVISIONS OF NATIONAL LAW
"80 Credit for, or repayment of, overstated or overpaid VAT
(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
(1B) Where a person has for a prescribed accounting period (whenever ended) paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as a result of-
(a) an amount that was not output tax due being brought into account as output tax, or
the Commissioners shall be liable to repay to that person the amount so paid.
(2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose. …
(a) as a result of a claim under this section by virtue of subsection (1) or (1A) above an amount falls to be credited to a person, and
(b) after setting any sums against it under or by virtue of this Act, some or all of that amount remains to his credit,
the Commissioners shall be liable to pay (or repay) to him so much of that amount as so remains.
(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".
"78 Interest in certain cases of official error
(1) Where, due to an error on the part of the Commissioners, a person has-
(a) accounted to them for an amount by way of output tax which was not output tax due from him and, as a result, they are liable under section 80(2A) to pay (or repay) an amount to him, or
(b) failed to claim credit under section 25 for an amount for which he was entitled so to claim credit and which they are in consequence liable to pay to him, or
(c) (otherwise than in a case falling within paragraph (a) or (b) above) paid them by way of VAT an amount that was not VAT due and which they are in consequence liable to repay to him, or
(d) suffered delay in receiving payment of an amount due to him from them in connection with VAT,
then, if and to the extent that they would not be liable to do so apart from this section, they shall pay interest to him on that amount for the applicable period, but subject to the following provisions of this section. . . .
(3) Interest under this section shall be payable at the rate applicable under section 197 of the Finance Act 1996 . . ."
PROVISIONS OF EU LAW WHICH THE COURT OF JUSTICE IS REQUESTED TO INTERPRET
THE NATIONAL PROCEEDINGS
(a) Between 1973 and October 2004 the Commissioners collected VAT in breach of EU (and national) law.
(b) Littlewoods therefore had a right to repayment of that overpaid VAT as a matter of EU (and national) law, these amounts having now been paid as set out above.
(c) Littlewoods has also been paid simple interest pursuant to and calculated in accordance with the relevant national statutory provisions (set out above).
(d) The conditions for State liability for damages for breach of EU law are not met.
(a) The first is a claim for restitution of tax unlawfully collected. This cause of action is commonly referred to as the "Woolwich claim".
(b) The second claim is for restitution of money paid pursuant to a mistake of law (the "mistake-based claim").
(a) that the limitation period applicable to a Woolwich claim is 6 years, running from the date on which the tax was overpaid;
(b) the limitation period for any mistake-based restitutionary claim is 6 years running from the date on which the claimant discovered the mistake or could with reasonable diligence have discovered it; and
(c) that those domestic law limitation periods conform with the requirements of EU law.
(a) Was the exclusion of the claims by sections 78 and 80 of VATA 1994 contrary to EU law? Questions 1 to 3 above relate to this issue.
(b) If so, could sections 78 and 80 of VATA 1994 be interpreted so as to conform with EU law (and if so, how), or did they have to be disapplied so as to allow either (a) only the Woolwich claims, or (b) both the Woolwich claims and the mistake-based claims? Question 4 above relates to this issue.
(c) Were the Commissioners entitled in principle as a matter of national law and of EU law to deploy a 'change of position' defence and/or an 'exhaustion of benefits' defence to (a) the Woolwich claims and/or (b) the mistake-based claims? If so, were these defences made out in fact and to what extent? The High Court originally considered that a question should be referred on this issue, but the parties submitted that such a question should not be referred at this stage of the proceedings, and the High Court accepted that the proposed question was academic at this point.
SUMMARY OF RELEVANT CONTENTIONS OF THE PARTIES
Questions 1 to 3
(a) As in Metallgesellschaft (at ¶87), the recovery sought by the Littlewoods claimants of a sum representing the use value of the amounts unlawfully levied is the very objective of their actions and the only relief claimed. Full reimbursement, including amounts representing the use value of which the United Kingdom has benefitted, is essential to restoring the status quo.
(b) In Metallgesellschaft the deprivation was merely temporary in that the only breach was in requiring that amounts which would eventually fall due be paid early. In the present case the deprivation was absolute rather than merely temporary in that the amounts were never due at all. The entitlement of Littlewoods to full reimbursement is, if anything, greater.
(c) That Metallgesellschaft involved an infringement of article 52 of the EC Treaty (now article 49 of the TFEU) is a distinction without a difference.
The Commissioners' Contentions
Questions 1 to 3
(1) Section 80 of VATA 1994, which requires repayment of overpaid VAT, effectively addresses the breach of EU law which has occurred.
(2) Whether interest is to be paid on the overpaid VAT, and if so in respect of what period, at what rate, and on what basis, is a matter for English law subject to the principles of effectiveness and equivalence.
(3) On the facts of the present case it is common ground that the applicable provisions of English law satisfy the principle of equivalence.
(4) The simple interest that is payable under section 78 of VATA 1994 complies with the principle of effectiveness.
THE VIEW OF THE REFERRING COURT (AND OTHER NATIONAL COURTS) ON THE QUESTIONS REFERRED
Questions 1 to 3