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Cite as: [2003] UKVAT V18186

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Specsavers Optical Group v Customs and Excise [2003] UKVAT V18186 (11 June 2003)

18186

VAT – repayments – statutory interest – decision letter produced following earlier appeal holding that Tribunal had no jurisdiction – whether error – whether delay

VAT – Agreement under section 85 VATA 1994 settling another appeal – effect on present appeal

VAT – earlier appeal pursued on matters not covered by a decision of the Commissioners – jurisdiction of Tribunal – whether further decision required

LONDON TRIBUNAL CENTRE

SPECSAVERS OPTICAL GROUP Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: JOHN CLARK (Chairman)

MRS LYNNETH SALISBURY

Appeal heard on papers only

Jonathan Peacock QC, instructed by Deloitte & Touche, Accountants, for the Appellant

Hugh McKay, Counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

This appeal relates to a claim by the Appellant for statutory interest. It follows an earlier decision of this tribunal (VAT Decision 18025) released on 25 February 2003 dismissing the Appellant's appeal "the first appeal". We refer to that decision as "our earlier decision". The factual background to the present appeal is identical to that for the first appeal, except for the specific matters referred to below, so it is not necessary for us to repeat our findings of fact. This decision is given on the basis that it is to be read together with our earlier decision, the terminology in the latter being used here where this is appropriate.

As the issues in this appeal are so closely tied to those reviewed in our earlier decision, the parties requested the Tribunal to direct that the appeal be considered on the papers without a hearing, and in view of the pending proceedings described below, that the consideration of the appeal and the issue of the decision should be expedited. Pursuant to those directions, the parties have served skeleton arguments setting out their further contentions.

In our earlier decision we held, first, that the Appellant was not entitled to statutory interest under section 78 of the Value Added Tax Act 1994 ("VATA 1994") for the period from 1 January 1994 until repayment. Secondly, we held that the Commissioners had made no decision as to any entitlement of the Appellant to interest for the period before 1 January 1998 ("the earlier period"), there having been no mention in the correspondence before us of any claim in respect of the earlier period or any decision relating to any such claim, and therefore that we had no jurisdiction to consider the question of a claim to statutory interest for the earlier period. Thirdly, we indicated what our views would have been if the matter had been properly before us, which were that the Appellant was not entitled to statutory interest under section 78 VATA 1994 for the earlier period, and held that if we were not correct in our views as to our jurisdiction, these views could stand as part of our decision.

The Appellant has appealed to the High Court in respect of the first aspect of our earlier decision, and we have been informed that the matter is shortly to enter into the Warned List. In addition, the Appellant's appeal to the High Court also addresses the question of our jurisdiction as considered in our earlier decision in respect of the appellant's entitlement to statutory interest for the earlier period. In his skeleton argument, Mr Peacock indicates that the Appellant's primary submission to the High Court on that question is that, properly analysed, the Tribunal did have jurisdiction to determine the question of interest for the earlier period, with the result that that part of our earlier decision can simply be treated as a decision adverse to the Appellant and thus a part of the appeal to the High Court.

Notwithstanding that submission, and in order to safeguard the Appellant's interests and put the matter beyond any doubt, the Appellant invited the Commissioners to make a decision in relation to the interest for the earlier period. (In our earlier decision, at paragraph 48, we referred to this as being the only formal method now available of resolving the issue in the absence of any agreement by the parties.) Thus the one additional fact to be taken into account in considering whether the Appellant is entitled to statutory interest for the earlier period is that a letter dated 25 April 2003 has been written by Mr Bennett of the Commissioners to Anbreen Khan of the Appellant's advisers, Deloitte & Touche. As this is so brief, we set it out in full:

"Further to your letter dated 9 April 2003, I confirm that the Commissioners will not pay any Statutory Interest in respect of the spectacles apportionment claims submitted for 1996 and 1997."

This is the decision against which the Appellant makes the present appeal. We understand that the Appellant intends to consolidate any appeal against this decision with its current appeal to the High Court, this being the reason for expediting this decision. This requires that we consider the merits of the present appeal on the additional facts to decide whether there is any reason to take a different view from that expressed in our earlier decision.

In his skeleton argument, Mr Peacock set out the matters described above, then referred to his original skeleton argument for the first appeal. (This original skeleton argument was helpfully attached as an appendix.) He referred to three parts of this original skeleton argument. The first reviewed what he considered to be the key error, the Commissioners' failure, contrary both to law and to their published policy, to apply the apportionment rate of B% agreed in September 1998 to the period commencing immediately after the 1995/96 VAT year. The second related to the Section 85 Agreement. The third challenged the specific contentions set out in the Commissioners' original Statement of Case. He submitted that the present appeal should be allowed, with costs.

For the Commissioners, Mr McKay argued that this appeal raised the same issues as those considered in the earlier decision, and it arose as the inevitable consequence of our conclusion on our jurisdiction as to the earlier years under appeal. He submitted that in reaching the earlier decision we had come to the right conclusion for the right reasons on the substantive (ie not jurisdictional) issues, and asked us to repeat those conclusions and the analysis that we had used to reach them. He referred to, and quoted, paragraphs 52 to 57 of our earlier decision. He referred to sections 78 and 85 VATA 1994. In relation to the latter, he stressed that the terms of the statutory deeming introduced by section 85(1) were not unlimited; no appeal could be made to the High Court against the terms of a section 85 agreement. As the terms of section 85(1) VATA 1994 were not unlimited, this raised the question of how far they should be taken by the statutory deeming process and for what purposes. He referred to Marshall v Kerr [1994] STC 360, at 364-366e. He referred also to the "dramatically similar" direct tax counterpart of section 85 VATA 1994, section 54 Taxes Management Act 1970, and the comments by Lord Hope in MacNiven v Westmoreland Investments Limited [2001] STC 237, at 263c to 264d.

The primary requirement for section 78 VATA 1994 to apply was that the Commissioners must have made an error; he submitted that the Commissioners had not made any error in this case. Entering into the Section 85 Agreement did not create an error where none previously existed. The machinery provided by section 85 VATA 1994 was limited to determining conclusively the amount of tax chargeable. The Section 85 Agreement had been entered into by the parties as part of their individual pragmatic approach to the litigation, and no more than that. Even if the Commissioners had been in error (which, as already submitted, they did not accept to be the case), the output tax paid by the Appellant at the times it did so was output tax due to the Commissioners and was not within section 78(1)(a) VATA 1994. On the question of delay, he submitted that the Appellant had not suffered delay in receiving any amount due to it. The amounts paid to the Appellant had been paid as promptly as they could have been in all the circumstances. Any delay that there might have been had been caused by the Appellant. He submitted that the appeal should be dismissed.

Conclusions

In our earlier decision we accepted that if we were not correct in our views on the question of jurisdiction, the "indications of our conclusions" could be treated as part of our decision (see paragraph 49 of our earlier decision). If that were the case, this decision would be unnecessary. We continue to take the view that we did not have jurisdiction in the first appeal to deal with the question of the statutory interest for the earlier period (although we accept that the High Court may come to a different view). The Commissioners had indicated that specific details in writing would be required before a claim for statutory interest could be considered further (see paragraph 18 of our earlier decision). The issue of interest for the earlier period had been left to one side (see paragraphs 19 and 20 of our earlier decision). There was no evidence that it had been pursued, and there was evidence that it had not (see the extract from Mr Bennett's witness statement quoted at paragraph 35 of our earlier decision). If the Commissioners do not make a decision, we have difficulty in seeing what can be the subject-matter of an appeal. Section 83(s) VATA 1994 does not appear to us to be a mechanism for compelling the Commissioners to make a decision on the payment of statutory interest where no claim has been made by the taxable person in respect of the period concerned. We draw the parties' attention to the recent decision of the Tribunal on a not dissimilar point in Take Care (Agency Services) Limited (VAT Decision 18041) in which the Tribunal, chaired by the President, stated at paragraph 13: "There was no decision as to liability and therefore nothing to appeal against."

It follows that we do consider this decision to be necessary to resolve the issue of the statutory interest for the earlier years. We have reviewed the parties' further contentions against the matters considered in our earlier decision, with particular reference to the claim to statutory interest for the earlier period. Having reconsidered our comments at paragraphs 52 to 57 of our earlier decision, taking into account the Commissioners' formal refusal in their letter dated 25 April 2003 to pay any such interest, we find no reason to change the views or the reasoning set out in those paragraphs. On Mr McKay's point concerning section 78(1)(a) VATA 1994, it follows from our confirmation of the views in our earlier decision that we agree with him; if one assumes (against our view) that the Commissioners were in error, the output tax paid by the Appellant at the times it did pay it was "output tax due from him" (ie from the Appellant to the Commissioners), and so could not fall within section 78(1)(a).

For the reasons set out above, combined with those set out at paragraphs 52 to 57 of our earlier decision, we hold that no statutory interest is due in respect of the earlier years. We therefore dismiss the appeal. Mr McKay made no application for costs; should the Commissioners wish to do so, we give liberty to apply.

JOHN CLARK

CHAIRMAN

Release date: 11 June 2003

LON/03/0444