United Kingdom House of Lords Decisions

    69th REPORT

    from the Appellate Committee

    12 July 2006

    Marks and Spencer plc (Appellants) v. Her Majesty's Commissioners of Customs and Excise (Respondents)

    Request for a preliminary ruling by the Court of Justice of the European Communities pursuant to Article 234 of the Treaty Establishing the European Communities

    ORDERED TO REPORT

    The Committee (Lord Nicholls of Birkenhead, Lord Steyn, Lord Hoffmann, Lord Scott of Foscote and Lord Walker of Gestingthorpe) have met and considered the cause Marks and Spencer plc (Appellants) v. Her Majesty's Commissioners of Customs and Excise (Respondents). We have heard counsel on behalf of the appellants and the respondents.

    On 28 July 2005, the Report of the Committee in this appeal was agreed by the House. It was ordered and adjudged that the issues raised in the speech of the noble and learned Lord, Lord Walker of Gestingthorpe, be referred to the Court of Justice of the European Communities for a preliminary ruling under Article 234 of the Treaty establishing the European Community in the form of a question or questions to be formulated by the House; and that further consideration of the appeal be adjourned sine die (11th Report, Session 2005-06, [2005] UKHL 53).

    The Committee considers that the preliminary ruling of the Court of Justice of the European Communities should be requested by the House on the following questions on which decisions are necessary to enable the House to give judgment in this appeal, namely:

1.   Where, under Article 28(2)(a) of the Sixth VAT Directive (both before and after its amendment in 1992 by Directive 92/77), a Member State has maintained in its domestic VAT legislation an exemption with refund of input tax in respect of certain specified supplies, does a trader making such supplies have a directly enforceable Community law right to be taxed at a zero rate?
2.   If the answer to Question 1 is in the negative, where, under Article 28(2)(a) of the Sixth VAT Directive (both before and after its amendment in 1992 by Directive 92/77), a Member State has maintained in its domestic VAT legislation an exemption with refund of input tax in respect of certain specified supplies but has mistakenly interpreted its domestic legislation with the consequence that certain supplies benefiting from exemption with refund of input tax under its domestic legislation have been subject to tax at the standard rate, do the general principles of Community law, including fiscal neutrality, apply so as to give a trader who made such supplies a right to recover the sums mistakenly charged in respect of them?
3.   If the answer to Question 1 or Question 2 is in the affirmative, do the Community law principles of equal treatment and fiscal neutrality in principle apply with the result that they would be infringed if the trader in question is not repaid the entire amount mistakenly charged on the supplies made by him in circumstances where:

    (i)  the trader would be unjustly enriched by repayment to him of the entire amount;

    (ii)  domestic legislation provides that overpaid tax cannot be repaid to the extent that repayment would lead to unjust enrichment of the trader; but

    (iii)  domestic legislation makes no provision similar to that referred to in (ii) in the case of claims by 'repayment traders'? (A 'repayment trader' is a taxable person who, in a given prescribed accounting period, makes no payment of VAT to the competent national authorities but receives a payment from them because, in that period, the amount of VAT that he is entitled to deduct exceeds the amount of VAT due in respect of supplies made by him.)

4.   Is the answer to Question 3 affected by whether or not there is evidence that the difference of treatment between traders making claims for the repayment of overpaid output tax and traders making claims for additional amounts by way of input tax deduction (resulting from the over declaration of output tax) has, or has not caused any financial loss or disadvantage to the former and, if so, how?
5.   If, in the situation described in Question 3, the Community law principles of equal treatment and fiscal neutrality apply and would otherwise be infringed, does Community law require or permit a court to remedy the difference of treatment by upholding a trader's claim to a repayment of overpaid tax in such a way as to enrich him unjustly or require or permit a court to grant some other remedy (and, if so, which)?