[2009] UKFTT 265 (TC)

TC00212
CAPPING PROVISIONS – overpaid output tax reclaimed by way of voluntary disclosure – out of time – has the tribunal any discretion? – no – appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
					BOTANICAL CATERING LTD	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: 	Lady Mitting (Chairman)

Sitting in public in Manchester on 7 September 2009

Malcolm Donaldson, director, for the Appellant

Jonathan Cannan, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2009
DECISION

1.	The decision under appeal is that of the Commissioners to refuse the Appellant’s claim for overpaid output tax in the sum of £4,977, the claim being made by way of Voluntary Disclosure dated 22 May 2008 and covering periods 01/03 to 07/04 inclusive.
2.	No oral evidence was called and the facts of the case, which were not in dispute, I find to be as follows.
3.	Botanical Catering Ltd was formed in July 2000.  It began trading in December 2000 as a seven-days-a-week daytime tea room and as an evening restaurant five days a week.  The premises are situated in the recently restored Sheffield Botanical Gardens and are surrounded by a variety of professional business offices and a major national call centre.  The business has been a very difficult financial venture from its outset.  Initially Mr. and Mrs. Donaldson, who are both directors, had two business partners who were top chefs and were to have supplied 50% of the initial costs.  One of these partners was killed in a road accident before the opening date and his brother, the other partner, then decided to withdraw.  This lead to the business being severely underfunded from the outset and huge difficulty was experienced in meeting the initial capital outlay required.  The business is still financially precarious and is, in particular, heavily dependant on the weather and a poor summer inevitably has an adverse effect on takings.  For economic reasons the evening restaurant closed in 2006.  There is a high demand for hot and cold takeaway food and for cold sandwiches.  Mr. Donaldson had always treated all sales, including his cold takeaway sandwiches, as standard-rated and had accounted for output tax on the sales.  He was alerted by an article in a national newspaper to the fact that such sandwiches should have been zero-rated.  Mr. Donaldson thus realised that he had overpaid his output tax and sought to reclaim the overpayment.
4.	On 11 December 2007, the Appellant submitted a Voluntary Disclosure to the Commissioners in respect of the overpayment for periods 10/04 to 10/07.  The claim was in the total sum of £10,250.82 and was met by the Commissioners.  On 22 May 2008, the Appellant’s accountants submitted a further Voluntary Disclosure in relation to periods 01/03 to 07/04.  Mr. Donaldson pointed out that the accountants had not made any claim for the period December 2000 to December 2002, possibly because they believed that there was a six-year time limitation.  This second Voluntary Disclosure was refused by the Commissioners as being capped.
Legislation
5.	Section 80(1) of the VAT Act 1994
	“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.”
Section 80(4) of the VAT Act 1994:
	“The Commissioners shall not be liable on a claim under this section
a)	to credit an amount to a person under subsection (1) or (1A) above, or
b)	to repay an amount to a person under subsection (1B) above,
if the claim is made more than 3 years after the relevant date.”
Section 80(4ZA) of the VAT Act 1994:
	“The relevant date is
a)	in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection, unless paragraph (b) below applies:
b)	in the case of a claim by virtue of subsection (1) above in respect of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;”
The Appellant’s submissions
6.	It was the basic contention of Mr. Donaldson that the overpayment having been made, the government had benefitted from a payment which was not due to them and should never have been paid and for them to keep it was therefore utterly unjust.  That money did not belong to the government but to the Appellant.  Mr. Donaldson highlighted the complexity of the legislation and that despite several calls to the Advice Centre, only one officer had been able to explain the law to him.  The Appellant had been advised by at least three sets of accountants, none of whom had picked up the differentiation in tax treatment of hot and cold food.  Finally, Mr. Donaldson described the catastrophic effect on his business which a refusal of the company’s appeal would have.  It was possible that the business would fold.
Conclusions
7.	It has at all times been accepted by the Commissioners that the supply of cold sandwiches by the Appellant to its customers should have been zero-rated.  Equally, it is accepted that in accounting for output tax, the Appellant has made an overpayment of tax, which in the normal course of events would be repaid on receipt of a Voluntary Disclosure.  This first Voluntary Disclosure was accepted and credited.  The second, however, is quite clearly out of time.  The “relevant date” is 31 July 2004.  Under section 80, the claim for repayment should therefore have been made by 31 July 2007.  It was not in fact made until 12 May 2008 and under the provisions of section 80 was therefore quite clearly capped.  Section 80 gives no discretion either to the Commissioners or to the tribunal.  It is absolutely clear and has to be applied.  The claim was made out of time and the Commissioners’ decision to refuse it was therefore correct and I have to uphold it.  The appeal is therefore dismissed.  There was no application for costs by Mr. Cannan and I make no order.
MAN/2008/1578

LADY MITTING
CHAIRMAN
Release Date: 16 October 2009