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Cite as: [2007] UKVAT V20238

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Arm Inc. v Revenue & Customs [2007] UKVAT V20238 (10 July 2007)

20238

Value Added Tax – claim for repayment of input VAT by Third Country Trader – 13th Directive – whether claim "made" when despatched or when received for purpose of time limit in regulation 192 VAT Regulations – whether claim complied with regulation 191 – appeal dismissed

LONDON TRIBUNAL CENTRE

ARM INC Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: CHARLES HELLIER (Chairman)

Sitting in public in London on 27 April 2007

The Appellant did not appear and was not represented

David Mansell, counsel, instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Arm Inc appeals against the Respondents' decision not to make it a refund of input VAT claimed by it under the 13^th Directive.

The 13^th Directive requires each Member State to refund to a taxable person not established in the EC, any VAT on goods or services supplied to him in that Member State. The UK Legislation imposes conditions for the refund. The Respondents say that Arm Inc did not meet the relevant conditions. In particular:

(i) it did not make its claim within the relevant time limit; and

(ii) it did not submit with its claim a "certificate of status".

Arm Inc, having given notice of appeal, did not appear by any person before me. It had been sent good notice of the hearing by the Tribunal Centre. It was not practicable to attempt to telephone the Appellant immediately prior to the hearing because its offices were in California and at the time fixed for the hearing it was night time in California. Taking advantage of rule 26(2) of the Tribunal's rules and with the agreement of the Respondents I proceeded to consider the appeal.

The Law

The 13^th Direction so far as relevant provides:-

"Article 2

Without prejudice to Articles 3 and 4, each Member State shall refund to any taxable person not established in the territory of the Community, subject to the conditions set out below, any [input VAT on goods and services used for making inter alia taxable supplies].

Member States may make the refunds referred to in paragraph 1 conditional upon the granting by third states of comparable advantages regarding turnover taxes …

"Article 3

The refunds referred to in Article 2(1) shall be granted upon application by the taxable person. Member States shall determine the arrangements for submitting applications, including the time limits for doing so, the period which the applications should cover, … They shall impose on the applicant such obligations as are necessary to determine whether the application is justified and to prevent fraud, in particular the obligation to provide proof that he is engaged in an economic activity in accordance with Article 4(1) [of the Sixth Directive] …

Refunds may not be granted under conditions more favourable than those applied to Community taxable person. [This is a reference to the refund provisions of the Eighth Directive.]"

It can be seen that the Directive creates a right ("shall") to refund subject only to compliance with such conditions as may be made in conformity with the Directive. The two conditions which the UK is required to determine which are relevant to this appeal are:-

(1) the time limits for "submitting applications"; and

(2) the obligations necessary to show that the application is justified.

The Eighth Directive provides for refunds to EU traders. It too provides for a right to a refund subject to certain conditions. Whereas the 13^th Directive leaves time limits to be set by the Member State concerned, the Eight Directive sets a six month limit for the submitting of applications.

Section 39 VATA 1994 begins the translation of these Directives into domestic law. It provides authority for the Commissioners to embody within regulations a scheme for the repayment of VAT (a) to persons carrying on business in a Member State (picking up the Eighth Directive repayment provision) and (b) to persons carrying on business in other countries (thus picking up the 13^th Directive requirements). Section 39(3) provides:-

"(3) Repayment shall be made in such cases only, and subject to such conditions, as the scheme may prescribe (being conditions specified in the regulations or imposed by the Commissioners either generally or in specific cases); and the scheme may provide:-

… (b) … (ii) for treating claims as if they were returns under this Act and repayments as if they were repayments of input tax … ."

The scheme for non-EU traders was for the relevant period embodied in regulations 185 to 197 of the VAT General Regulations (SI 1995/2518). Regulations 185 to 190 deal with the input tax which may be recovered and other matters not at issue in this appeal.

Regulations 191 and 192 are central to this appeal. I shall set them out in full in addressing the arguments, but in summary they provide that a claim must be made within 6 months after the 12 months ending on 30 June in any year, be made in prescribed form, and be accompanied by a form issued by the fiscal authority of the claimant's jurisdiction of establishment certifying that the claimant is a registered business person in that jurisdiction (a "certificate of status").

Background

The Appellant provided neither oral evidence nor witness statements but included various documents with its notice of appeal. The Respondents provided a witness statement of Stephen Mitchell, their officer who dealt with the Appellant's claim and other copy documents. The Respondents did not dispute the factual contentions of the Appellants in the documents before me. I make the following factual findings for the purposes of this decision:

(1) Arm Inc carries on a business in California;

(2) it is not registered for VAT;

(3) it submitted a form for a claim in respect of the period from 1 July 2004 to 30 June 2005 for repayment of VAT under the 13^th Directive, section 39 and Regulation 191;

(4) the form was signed on 30 December 2005;

(5) it entrusted the claim form to the US Postal Service on 31 December 2005 and it was postmarked by that service on that day;

(6) but the claim form was received by the Respondents on 6 January 2006;

(7) the Respondents have received from the Appellant two certificates of status provided by the US Internal Revenue Service, one dated 21 December 2005 and one dated 19 July 2001. The Appellant, I find, has despatched no other such certificate to the Respondents. The certificate dated 21 December 2005 was sent to the Respondents in August 2006.

(8) a schedule attached to the claim form signed on 30 December 2005 did not contain all the required details of the supplies to the Appellant in respect of which the claim was made. A revised form containing these details was despatched by the Appellant with a letter dated 29 August 2006.

The Respondents wrote to the Appellants on 1 August 2006 refusing the claim on the grounds that:-

(i) the claim was made out of time because the form was received on 6 January 2006 when it should have been received on or before 31 December 2005;

(ii) a certificate of status was not furnished with the claim (and the Commissioners did not have in their possession a certificate of status dated not more than 12 months before the date of the claim); and

(iii) the schedule of input tax claims attached to the claim form did not contain the necessary details.

There was also a concern that some of the supplies in respect of which claims were made did not qualify under the scheme.

The Appellant's arguments

In its notice of appeal the Appellant deals only with the first ground on which the Respondents refused its claim. It says that its claim was "made" on 31 December 2005 when the claim form was posted and not on the date it was received by the Respondents and was therefore made in time. Further it says that the Respondents had in respect of previous periods accepted claims which would have been received after 31 December for the relevant year, and thereby created a reasonable expectation that claims postmarked on or before 31 December would be accepted as made on time.

The notice of appeal does not deal with the issue in relation to the certificate of status, but in earlier correspondence with the Respondents the Appellant asserts that the "previous year's certification would still have been valid at the time we made the claim", and the claim form contains the words "The prior certificate date Jan. 31, 2005 is still valid." I note that I have found that the latest certificate received by the Respondents is dated 21 January 2005, and that this was despatched and received in August 2006.

The Date of the claim

Regulation 192 appears under the hearing "Time within which a claim must be made". It provides so far as relevant:

"(1) A claim shall be made not later than 6 months after the end of the prescribed year …"

The end of the "prescribed year" was 30 June 2005. Six months after that date was 31 December 2005.

The issue for me under this heading is therefore when a "claim" can be regarded as "made", and in particular whether a claim is made when the claim form is posted or when the claim form is received by the Commissioners.

In passing I note that regulation 192 does not in terms provide that a claim made after the relevant date shall not be entertained or that the right to the refund is conditional upon the claim being made within the time limit. It seems to me however that in the context of Article 3 of the 13^th Directive, this regulation at the very least empowers the Commissioners to refuse any claim made after the relevant date.

In Customs and Excise Commissioners v W Timms & Sons (Builders) Ltd [1992] STC 374, the High Court considered the provisions of section 20(1) FA 85 which provided for a repayment supplement to be paid by the Commissioners if a VAT return disclosing a repayable amount was "received by the Commissioners" by a certain date and the Commissioners were slow in making the repayment of the VAT. The appellant in that case had posted its return on 15 September 1987 but it was not received until 31 March 1988. The question was whether the return was "received" when it was entrusted to the post office by the appellant or actually received by the Commissioners.

Macpherson J accepted the argument that section 20 must be construed by reference to its own statutory purpose which was to induce the Commissioners to process repayment claims quickly and efficiently. By reference to that purpose the section contemplated actual receipt of the return by the Commissioners because they could not act until they had actually received the return. It could not have been the purpose of the section to penalise the Commissioners for delays on behalf of the Post Office.

In Aikman v White [1986] STC 1 the Court of Session considered the requirement in the then applicable VAT regulations that a person "furnish" a VAT return to the controller. Lord Wheatley held that "furnish" meant putting the return into the possession or controller, but, since the controller had provided a prepaid envelope and instructions that the return be posted in that envelope to the controller, the return had been furnished when it was given to the post office as the agent of the controller. Lord Robertson held that the sender must be regarded as completing his part of the act of furnishing when he had completed the return and posted it, finding, as I read his judgment that the controller's instructions to post the return provided additional grounds for saying that it had been furnished when posted. Lord Dunpark rests his conclusion mainly on the intimation that the Commissioners were appointing the post office as their agent.

Hayman v Griffiths [1987] STC 649 related to the same issue: the meaning of "furnish" but in the context of a form set out in the regulations which bore on it posting instructions. The Queen's Bench Divisional Court followed Aikman v White, finding that where the form specified in the regulations provided instructions to return a form by post in a pre-printed envelope the regulations had adopted a "refined meaning of 'furnish'" which meant that the obligation to furnish was satisfied on posting the completed form.

In Timms, Macpherson J found that these two decisions, made in the context of different legislation and the requirements of the specified forms or the instructions of the Commissioners as to how to send them, were not relevant to the statutory context of "received" in section 20(1) FA 85.

In Quintain Estates Development plc [VAT Decision 18877], the Value Added Tax tribunal considered a late claim to repayment of input tax under regulation 29 of the VAT Regulations. The Regulations provided so far as relevant:-

"(1) … a person claiming a deduction of input tax … shall do so on a return made by him …

(1A) The Commissioners shall not allow … a person to make any claim … in terms such that the deduction would fall to be claimed more than 3 years after the [due date for the return]."

The tribunal (Malcolm Gammie QC) considered the difference between the making of an assessment and the making of a claim, and noted that in the context of an assessment the Act drew a distinction between the making of an assessment and its notification, but that there was no such distinction drawn in relation to the making of a claim. He noted that the fact that making a claim might therefore encompass both completion of the claim and its notification recognised the need for both completion and despatch. He concluded that the Appellant had made its claim when it had completed the relevant form and notified the claim, and that all the Appellant needed to show as respects the notification limb was that it had done that which it could do to notify its claim, and it could show that by proving that it had posted the letter.

The Tribunal indicated that in reaching this conclusion it did not rely upon any concept of the post office being constituted the agent of the Commissioners, or the Commissioners expressly accepting such a method of notification. Instead the Tribunal thought that the essence of entrusting the claim to the post office was that the letter, once in the hands of the post office, was beyond recall and in that sense had been made, and that, as Lord Robertson had noted in Aikman, it would be absurd to think that Parliament intended that to be sure of the matter taxpayers should be required to travel to their local VAT office (in working hours) to deliver the letter into the hands of the Commissioners' staff.

I set out at the beginning of this section the provisions of regulation 192 which required that a "claim shall be made not later than 6 months after the end of the prescribed [period]". I need also to set out regulation 191 which provides a setting for that requirement:-

"(1) A person claiming a repayment … shall –

(a) complete … and send to the Commissioners [a form], and

(b) at the same time furnish –

(i) a certificate of status …, and

(ii) … documentary evidence of an entitlement to deduct …"

I should highlight here for future reference the words "claiming", "send", "at the same time" and "furnish".

Mr Mansell makes the following points for the Commissioners:-

(i) he says that section 191 and 192 impose mandatory requirements: each uses the word "shall";

(ii) he says that in regulation 192 there is nothing specifically to define when a claim is 'made' but it cannot be made until all the requirements of regulation 191 have been fulfilled;

(iii) he points to the use of the word "send" in regulation 191(1)(a). He notes that one of the Shorter Oxford English Dictionary meanings of 'send' is "to cause (a thing) to be conveyed or transmitted by an intermediary to another person or place". It means he says more than just 'put in the post'; in context it must mean 'procure receipt'.

(iv) he says that "furnish" means provide; rather than despatch. The use of "furnish" must influence the meaning of "send" if the two are to be done "at the same time";

(v) regulation 192 uses "make". The Oxford English Dictionary's sixth definition of "make" is to arrive at a place within a specified time – as in "he doesn't always make it on time". In context that was the right meaning here;

(vi) Timms makes clear that the question must be determined by reference to the statutory purpose. Here, as recognised by the Directive, there was a need to provide a time limit: to ensure prompt receipt of a credible auditable claim, to prevent fraud, to use the finite resources of the Commissioners most effectively, and to recognise that early scrutiny of a claim was necessary when, in the case of a claimant outside the EU the normal reliance on VAT audits would not be available. The need was for the events which were the subject of the claim not to be so old that their audit would not be straightforward.

(vii) Quintain Estates was distinguishable because the procedures were different, because the claimant in that case could be more easily audited, and because the statutory language under consideration was different: it did not contain "furnish" or "send".

Discussion

I start with the language of regulations 191 and 192.

The requirement of regulation 191(1)(a) is that the form must be sent to the Commissioners; it is not that it must be received by them. It seems to me that the natural meaning of "send" in this context is to despatch and not to procure the receipt.

The use of 'furnish' in regulation 191(1)(b) could affect the proper meaning of send. If "furnish" had the meaning ascribed to it by Lord Wheately in Aikman in the context of that case, namely putting something in the possession of the Commissioners, then that could not be done "at the same time" as the sending unless 'send' meant procure receipt rather than merely despatch. But in Aikman the regulatory requirement was to "furnish to the controller … with a return"; by contrast no person is expressly described as the recipient of the furnishing in regulation 191(1)(b). It seems to me that 'furnish' as used there may well mean to furnish what is sent to the Commissioners with the embellishments set out in paragraphs (i) and (ii), or at least carry that connotation. It does not seem to me therefore that 'furnish' in regulation 191(1)(b) compels a different meaning of 'send' in paragraph (a).

In fact the contrary seems to me to be the proper construction. The "at the same time" requirement in (b) is not linked only to the "sending" in (a). There are two requirements in (a) – one to "complete" the form, the other to "send" it. "[A]t the same time" appears to apply to either activity or to both. If 'furnish' here carries the connotation of to provide, elaborate or embellish rather than to deliver, its meaning fits better with "complete … the form". That suggest that these requirements are all to do with the actions that the claimant must take, and that suggests that "send" is limited in meaning to "despatch".

Regulation 191(1) speaks of a person 'claiming'. The use of the participle initially suggests a continuous process. Mr Mansell argues that its context suggests merely what the content of a claim should be, not that once a person has submitted a claim he remains a person 'claiming' until his claim is satisfied. The sequence of regulation 191 and 192 suggests to me that regulation 191 sets out what is needed to make a claim and regulation 192 applies to limit the time by which what is required by regulation 191 must be done. This suggests to me that in this context a claim is made when the requirements of regulation 191 have been satisfied.

On this basis it seems to me that the better interpretation of the words of these provisions is that the relevant form and accompanying documents must be despatched within the relevant time limit, and that the time of their receipt by the Commissioners is not relevant.

I then turn to ask whether the background of the Directive or the statutory purpose should compel a different approach.

The 13^th Directive provides that the Member States shall determine the "arrangements for submitting applications, including the time limits for doing so". These words to my mind do not point clearly to a limitation based on the time of the receipt of an application: "submitting" does not clearly point to a requirement relating to receipt.

The Eighth Directive which relates to EU refunds provides in Article 7.1 that "[a]pplications shall be submitted to the competent authority … within six months …". Section 39 enacts that directive too, and Regulations 185 to 192 provide the rules for refunds to with non-EU traders. Regulation 179, which imposes the time limit in relation to EU traders, is in the same terms as Regulation 192. If this Directive were imposing a requirement to impose a condition as to the time of receipt of a claim for an EU trader it could be appropriate to read regulation 179 as creating such a condition; and since regulation 192 was the same language, and most not be less restrictive than the regime for EU traders by virtue of Article 3.2 of the 13^th Directive, it could be appropriate to endeavour to construe regulation 192 in the same way. But I do not read "submitted" in Article 7.1 of the Eighth Directive as necessarily importing a requirement of receipt: it seems to me that something may be submitted when it is despatched. However the French version of the Directive provides that:

"La demande doit être presentée au service competent … dans les six mois suivant [the expiration of the relevant period]."

and this language is to my mind redolent of a requirement that the claim be received within the six months.

The French text and the possibility that 'submit' could mean 'ensure receipt', suggest to me that the Eight Directive should be construed as imposing a requirement that the claim be received within six months. As a result the only EU right to a refund available to a taxpayer would be if he presented his claim within six months. But domestic law could offer a greater right and the question remains whether the domestic legislation can be construed in conformity with the more clearly restrictive EU provisions.

I turn to consider the purpose of the statutory provisions. I accept that the aims must be those advanced by Mr Mansell (see paragraph 30(vi) above), and I agree that such aims would most successfully be achieved by a condition which related to the time of receipt of a claim by the Commissioners. On the other hand whilst some uncertainty or delay might occasionally be caused by a time limit which worked by reference to despatch rather than receipt, in the normal course a limit relating to despatch would meet those aims. Lord Robertson noted in Aikman that it was difficult to accept that the regulations intended that the claimant should have to travel to a VAT office to deliver the claim to an official in person before he could be sure that his claim was properly made. It is however always possible to send a letter via a courier who will obtain a receipt for delivery or via recorded delivery in the UK and I do not believe that regulations which effectively required the claimant to take that course of action would be oppressive.

Putting these considerations together : I am not convinced that statutory policy compels an interpretation which requires the claim to be received rather than despatched within the time limit; the considerations of the 8^th Directive points strongly to an interpretation which does have that result but leaves open the possibility of a more generous domestic rule; and the language of the regulations, in particular the requirement that the claimant must 'at the same time' complete the form, furnish the additional elements and sent it, seem to me to indicate that the claim is made when the claimant has despatched the complete package. Overall I do not find that the consideration of the Directive requires a more restrictive domestic rule or that the domestic rule can be read more restrictively, and therefore I find that the claim is made when it is despatched.

I therefore find that the regulations require the despatch of the claim accompanied by (or furnished with) the additional information and pieces of paper within the 6 month period rather than its receipt (so furnished) within that period. That is not to say that any method of despatch of the claim is adequate to meet the requirement that the claim be sent: giving the claim to the dog with instructions to take it to the Commissioners is not sending it. In the context it seems to me that the condition that the claim be sent is not satisfied until the claim is despatched in such a manner as with reasonable certainty will ensure prompt delivery.

The Appellant's claim form was despatched within that period. It was despatched in a manner which would with reasonable certainty ensure prompt receipt. Therefore if it complied with the requirements of the legislation it was not out of time.

The contents of the Appellant's claim

Regulation 191 provides so far as relevant to this issue:-

"(1) A person claiming a repayment … shall –

(a) complete … and send … the form,, and

(b) at the same time furnish

(i) a certificate of status issued by the official authority of the third country in which the trader is established either in the form numbered 10 in Schedule 1 to those Regulations or on a like form produced by the official authority, and

(ii) such documentary evidence of an entitlement to deduct input tax as may be required of a taxable person claiming a deduction of input tax in accordance with … regulation 29.

"(2) Where the Commissioners are in possession of a certificate of status issued not more than 12 months before the date of the claim, the claimant shall not be required to furnish a further such certificate."

The Appellant did not furnish a certificate of status with its claim. Therefore, on my reading of regulations 191 and 192 it did not make a satisfactory claim on time or at all unless it can rely upon regulation 191(2). But on 30 December 2005, the date the form of claim was signed, and on 31 December 2005 the date on which in my judgment the claim was 'made', the most recent certificate of status in the Commissioners' hands was that dated 19 July 2001. Accordingly on the date of the claim the Commissioners were not in possession of such a certificate as enabled the Appellant to rely upon regulation 191(2).

On 29 August 2006 the Appellant wrote to the Commissioners enclosing a certificate of status dated 21 December 2005. Had that certificate been provided when the claim was made or had it then been in the possession of the Commissioners, the Appellant would have satisfied the certificate of status requirement in relation to the claim under appeal. But it did not, and even if, by virtue of the delivery of the form in August 2006, the claim was then complete in the sense that regulation 191 was then complied with, and it could therefore be said that that was the date on which the claim was made, on that date the claim was made too late.

I therefore dismiss the appeal.

No application was made for costs. I have decided to award costs to neither side.

CHARLES HELLIER

CHAIRMAN

RELEASED: 10 July 2007

LON 2006/922