United Kingdom VAT & Duties Tribunals Decisions

Mobilx Ltd v Revenue & Customs [2006] UKVAT V19966 (6 October 2006)

19966

STRIKE-OUT - whether tribunal has jurisdiction to entertain an appeal as to the amount of input tax reclaimable when HMRC reserve their position as to whether they will admit the reclaim in whole or in part - yes - applications to strike out the appeals dismissed

MANCHESTER TRIBUNAL CENTRE Reference Nos: MAN/2006/0534

MAN/2006/0617

MOBILX LTD Appellant

-and-

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Michael Johnson (Chairman)

Sitting in private in North Shields, Tyne & Wear on 21 September 2006

Mark Hetherington, of PricewaterhouseCoopers LLP, chartered accountants for the Appellant

Bernard Haley, of the Solicitor's office of H M Revenue and Customs for the Respondents

DIRECTION

1. H M Revenue and Customs ("HMRC") have made application to the tribunal by Notices respectively dated 2 August 2006 and 7 September 2006 to strike out these two appeals, on the ground that the tribunal lacks jurisdiction to entertain them. It has been agreed between the representatives of the parties that the two applications should be dealt with together.
2. I am in agreement with that. Also, although the hearing has been in private, the representatives of the parties have suggested, and with this too I agree, that this direction and the reasons for it should be made public. The reasons for this are firstly the potential significance of the direction, and secondly the fact that I am differing from Dr John Avery Jones CBE (Chairman) in his recently published ruling in the appeal of PNC Telecom plc v The Commissioners for H M Revenue and Customs proceeding under tribunal reference LON/06/0685 (hearing 1 September 2006, direction released 4 September 2006). I will call that appeal "the PNC case".
3. Dr Avery Jones struck out the PNC case on the basis that there had been no decision against which the Appellant in that case could appeal. That is similarly the contention of HMRC in the applications with which I now have to deal. Mr Haley, appearing for HMRC, has cited the PNC case in support of the instant applications to strike out, and has invited me to follow it.
4. Both the appeals before me relate to claims for repayments of input tax. The tribunal is invited to entertain the appeals under section 83(c) of the Value Added Tax Act 1994 ("VATA"). Mr Hetherington, appearing for the Appellant, submits that a repayment is undoubtedly due, having been properly sought and vouched for. He says that the Appellant has no knowledge that its purchases may have been tainted by fraud. He submits that HMRC are delaying unreasonably in making repayment, and that the Appellant is suffering hardship in consequence.
5. For HMRC, Mr Haley has referred me to the contents of a letter dated 3 August 2006 written to PricewaterhouseCoopers LLP by Mr John Martin of HMRC, Regional Business Services North, Washington, Tyne & Wear. It is clear from that letter that the repayment claim made by the Appellant is under continuing review by HMRC, in the context of "transaction chains" involving defaulting traders.
6. In that letter, Mr Martin writes, inter alia:

"Enquiries remain ongoing to establish the facts and the true nature of the relevant transactions in order that [HMRC] can test the validity of the repayment claim and decide what course of action to take. As you have already been advised, depending on the evidence available this could be to repay part or all of the claim, deny input tax on [the] abuse of rights principle, or deny input tax because of invalid invoices. Action could also be considered under the joint & several liability provisions.

"Following the further review of the April 2006 repayment claim, it has been decided that the VAT repayment claimed will continue to be withheld whilst our enquiries continue. … "

7. Mr Hetherington submits that it is unsatisfactory that the continuation of enquiries is open ended in such a way that is not clear when they may be regarded as having come to a conclusion. Dr Avery Jones regarded it as less than satisfactory that HMRC can take their time over the investigations without any control by the tribunal, when an appellant wants to appeal (see the direction in the PNC case, page 5, paragraph 9, lines 13 & 14). He however felt constrained to strike out the appeal in the PNC case, holding that, as counsel for HMRC had submitted, the appeal could not be entertained until it might be known whether HMRC were in fact disallowing the input tax deduction.
8. In that case, counsel for the appellant had submitted that the appeal could be entertained "at the beginning" and that HMRC's investigations could be monitored by the tribunal as part of its case management (see the direction in the PNC case, page 4, paragraph 8, lines 45 & 46 to page 5, line 1). Counsel for HMRC submitted as mentioned in paragraph 7 above, and further that the process of judicial review, or more practically, recourse to the Adjudicator was available to monitor the length of HMRC's investigations (page 5, lines 1 to 4).
9. The ratio of Dr Avery Jones's ruling appears to be that he did not consider that one can have a dispute about the "matter" of the amount of input tax, within section 83(c) of VATA, until the outcome of HMRC's investigations is known; they may after their investigation conclude that the appellant did not know and should not have known about any fraud - or it may be that there was no fraud (see page 5, lines 6 to 9 of his direction).
10. I have hesitated before daring to differ from a Chairman of the experience of Dr Avery Jones. But it seems to me that the reason given by him for not entertaining an appeal of this kind means that an excessively restrictive interpretation has been placed on the scope of section 83(c). Section 83(c) does not make it a requirement that, in order to ground an appeal, it should be clear at the outset how much input tax each party says should be credited to an appellant; it simply provides that an appeal shall lie to a tribunal with respect to the amount of any input tax which may be credited.
11. It follows, as I see it, that at the time the notice of appeal is served, it is irrelevant whether HMRC have finally made up their minds to allow the reclaim in full, in part, or not at all. The purpose of an appeal of this kind is, indeed, that they should be required to take up a position with regard to the reclaim, so that the tribunal can then decide between the parties.
12. One notes that, in other sub-paragraphs of section 83, it is stated that an appeal lies against "a decision of the Commissioners". In relation to those matters, a decision would be a pre-condition of an appeal. A decision is not, however, stated as a prerequisite of section 83(c).
13. Moreover there are matters listed in section 83 which do not necessarily require a positive stance to have been taken by the Commissioners before an appeal is justified. Examples are those cases where a "refusal" on the part of the Commissioners is an appealable matter. In those cases, it will be a matter of fact whether the Commissioners have "refused". Silence or inaction alone might amount to "refusal". The tribunal will not be without jurisdiction, simply because the Commissioners have not written to confirm that they are refusing.
14. In the same way, it seems to me that section 83(c) does not require a positive stance to have been adopted by the Commissioners before an appeal can be entertained under that provision. Section 83(c) is apt, I think, to cover any situation where an issue has arisen between a would-be appellant claiming entitlement to a credit for input tax, on the one hand, and HMRC on the other.
15. This approach is equivalent to that adopted by Mr Colin Bishopp (Chairman) in Tricell UK Ltd v The Commissioners of Customs and Excise (2003) VAT Decision 18127 at paragraphs 20 to 23, cited to me by Mr Hetherington. What founds the jurisdiction of the tribunal is that an issue exists between the parties as to the amount if any of input tax that can be reclaimed. In my view, there is clearly such an issue, here and now, between the parties in the appeals which I am considering. The issue is a present one, not a future one.
16. Any residual question about that is in my view resolved by the extract from Mr Martin's letter dated 3 August 2006 which I quote above. In that letter, Mr Martin has accepted that "depending on the evidence available", the whole, or part, or none of the input tax reclaim may be met by HMRC. The decision to withhold the repayment in full pending the assembly of such evidence in my view grounds the jurisdiction of the tribunal in these appeals.
17. Mr Haley accepts that, in many cases that these tribunals entertain, periods of time are directed during which evidence is assembled, enquiries made, and attempts to improve the respective cases of the parties are pursued. In the meantime, the tribunal has control of the pace at which the appeal is carried forward towards substantive hearing. It is not clear to me why a similar process should not ensue in the case of the instant appeals.
18. For the above reasons, I direct that the applications to strike out are each dismissed. Seeing that the two appeals relate to similar subject-matter, and that the appellant is the same in each case, I direct at the invitation of the parties' representatives that the appeals should be consolidated. Finally, at the invitation of Mr Haley, I direct that the Respondents' statement of case and list of documents are to be served at the Manchester Tribunal Centre within 30 days of the release of this reasoned direction.

MICHAEL JOHNSON

CHAIRMAN

Release Date: 6 October 2006