[2010] UKFTT 134 (TC)

								TC00443

Appeal numbers LON/2007/1510
							      LON/2007/1511
							      LON/2008/0127
						                  LON/2008/2471

REPAYMENT OF VAT – Eighth and Thirteenth Directives – Application for repayment – Failure to include required documentation – FACEVET procedures – Applications returned to claimants – Too late for claimants to make in time applications – Whether application of FACEVET violates fiscal neutrality and discriminates against non-domestic claimants – No – Directive 79/1072/EEC (Eighth Directive) – Directive 86/560/EEC (Thirteenth Directive)

FIRST-TIER TRIBUNAL
TAX CHAMBER
 
(1) AREVA T&D PROTECTION ET CONTROLE
(2)  CANAL +
(3) GILEAD SCIENCES INC
	(4) LOCKTON INSURANCE AGENCY INC	Appellants

- and -
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

				TRIBUNAL: 	 SIR STEPHEN OLIVER QC
						 SHEILA CHEESMAN
						
Sitting in public in London on 12 and 13 February 2010

Andrew Hitchmough, counsel, instructed by PricewaterhouseCoopers, for the Appellants

Alexander Ruck Keene, counsel, instructed by the general counsel for HMRC, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	These four appeals raise closely related issues regarding the repayment of VAT incurred in the UK by overseas traders.  By “overseas traders” we mean entities carrying on business activities and either registered in other European Union states or certified as such elsewhere in the world.  Overseas traders incur significant amounts of VAT in the United Kingdom each year.  Pursuant to legislative provisions contained in the Eighth and Thirteenth Directives set out below, the United Kingdom has implemented mechanisms to process claims for the repayment of such VAT.  The amounts of potentially repayable VAT are considerable.  We heard evidence from Stephen Catterson of HMRC’s Overseas Repayment Unit dealing with claims under both Directives amounting to some £274.5 million in 2005 (37,127 claims), £341.4 million (33.401 claims) in 2006  and £347.7 million (34,987claims) in 2007.  HMRC receives 50% of its applications for repayment in June and December (i.e. the two months in which the deadlines for applications under the Eighth and Thirteenth Directives fall respectively).  

2.	In 2005 HMRC introduced a process operated from the Overseas Repayment Unit in Londonderry for dealing with claims for repayment.  This was known as “FACEVET”. Through this procedure the Overseas Repayment Unit made arrangements to check the completeness of claims for the repayment of VAT incurred by overseas traders as soon as the claims were received.  Prior to the introduction of the scheme, claims with procedural errors could have taken up to twelve months to be refused.  The introduction of the FACEVET scheme, first explained in a letter of December 2004 and commenced with effect from 1 January 2006, led to reduction of the average time to effect refunds to claimants to six months.   This is not in dispute.  For the calendar year 2006, one in six claims were returned to the claimant or their agents under the FACEVET procedure for not meeting the minimum standards (at a total value of £60m); for the calendar year 2007, one in ten claims were returned (at a total value of £60m).

3.	(New procedures were introduced to take effect after 1 January 2010 to deal with the handling of claims for VAT repayment made by traders within the European Union, i.e. those claiming under the Eighth Directive.  These new procedures implement an electronic cross-border refund system and differ considerably from those in place at the time when the present Eighth Directive issues arose.)

Legal framework
4.	The dispute is whether, as the four Appellants contend, HMRC’s policy in relation to the processing of claims under the Eighth or Thirteenth Directives is incompatible with EC law.  The FACEVET procedure is at issue rather than the precise wording of the relevant statutory provisions.  For an understanding of the context, however, we have included excerpts from the law at appropriate stages in this Decision.  At the present stage we need only set out the domestic requirements for Eighth Directive and Thirteenth Directive claims and the relevant part of the document of December 2004 in which HMRC announced their policy of processing applications submitted for repayment under the Eighth Directive.

5.	Regulation 178(1) of the 1995 VAT Regulations contains the domestic requirements for an Eighth Directive claim.  This requires a person claiming repayment under the provisions of the Eighth Directive to:

“(a)	complete in the English language and send to the Commissioners either the form numbered 15 in Schedule 1 to these Regulations [i.e. the VAT 65 Form], or a form designed for the purpose by any official authority, containing full information in respect of all the matters specified in the said form and the declaration as therein set out, 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 on the form numbered 16 on Schedule 1 to these 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 the provisions of Regulation 29.”

Regulation 179 contains the time limits within which a claim must be made.  This directs that the claim “shall be made not later than six months after the end of the calendar year in which the VAT claimed was charged”.

6.	Regulation 191(1) for the 1995 Regulations contains the domestic requirements for a Thirteenth Directive claim.  This requires a person claiming a repayment under the provisions of the Thirteenth Directive to: 

“(a)	complete in the English language and send to the Commissioners either the form numbered 9 in Schedule 1 to these Regulations [i.e. the VAT 65A Form], or a like form produced by any official authority, containing full information in respect of all the matters specified in the said form and a declaration as therein set out, 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 on the form numbered 10 in Schedule 1 to these 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 the provisions of Regulation 29.”

With the United States, HMRC required a certificate to be completed by the IRS.  Regulation 192 contains the time limits within which a claim under the Thirteenth Directive must be made: this imposes a deadline at the end of six months after the end of the year in which the VAT claimed was charged.

7.	The document establishing the FACEVET process is entitled “Application for refund of UK VAT by EC and non-EC businesses.  Changes from 1 January 2006”.  This provided, so far as is relevant:

“From 1 January 2006, we will immediately return any application as incomplete if it does not meet the following standards:

•	Certificate of business/taxable status.  All applications must be covered by a valid certificate of business/taxable status.  Once you have submitted this it is valid for a year.  If you are unsure about the format for the certificate please contact us.
•	Signature.  The application must be signed by the claimant or authorised person.
•	Original invoices, showing full information, with values in £Sterling. You must include original invoices with the application. The invoices must show all the information required by Notice 723, and must show values in £Sterling as well as in any other currency.

If your application is returned as incomplete you must resubmit it by the due date or it will be refused as “out of time”.  The due dates are:

•	For applications from EC businesses (under the Eighth Directive), 30 June in the year following the year the tax was incurred.  
•	For applications from non-EC businesses (under the Thirteenth Directive), 31 December for claims in the prescribed twelve months up to 30 June of that year”.

The role of Meridian VAT Processing (International) (“Meridian”)
8.	We were provided with the evidence of Ryan Ostilly, the commercial director of Meridian.  The four Appellants are all clients of Meridian.  Meridian is a company whose business includes the preparation and handling of Eighth and Thirteenth Directive refund claims on behalf of overseas traders.  Meridian had a number of other clients in the same situations as the present four Appellants.

The circumstances concerning each of the four Appellants
9.	The first Appellant, Areva T&D Protection et Controle (“Areva”), is a company registered in France.  In the 2006 calendar year, Areva incurred VAT in the United Kingdom in the sum of £935.  Under the legislative provisions referred to above, the deadline for claiming repayment of the VAT under the Eighth Directive was therefore 30 June 2007.  On 23 June 2007, Meridian submitted a claim for a refund of this amount on Areva’s behalf.  The claim was received by HMRC on 28 June 2007.  By letter of 11 July 2007, HMRC returned the claim form on the basis that it did not contain a valid Certificate of Status.  HMRC further noted that the completed claim form must be received within the legislative deadline, and that the deadline for submission of a claim form had by then passed.  

10.	The second Appellant, Canal +, is a company registered in France.  In the 2006 calendar year, Canal + incurred VAT in the United Kingdom in the sum of £24,384.  The deadline for claiming repayment of this VAT under the Eighth Directive was therefore 30 June 2007.  On 26 June 2007, Meridian submitted a claim for the refund of this amount on behalf of Canal +.  By letter of 11 July 2007 HMRC returned the claim form on the basis that it did not contain a valid Certificate of Status and that the VAT 65/65A form was unsigned.

11.	The third Appellant, Gilead Sciences Inc (“Gilead”), is a company registered in the United States of America.  In the twelve months ending 30 June 2007, Gilead incurred VAT in the United Kingdom in the sum of £79,372.  The deadline for claiming repayment of this VAT under the Thirteenth Directive was therefore 31 December 2007.  On 19 December 2007, Meridian submitted a claim for a refund of this amount on Gilead’s behalf.  The claim was received by HMRC on 21 December 2007.  By letter dated 2 January 2008, HMRC returned the claim form on the basis that the supporting invoices issued by the suppliers were not issued in sterling.  Meridian resubmitted the claim form, including a corrected invoice issued in sterling, with a letter dated 7 February 2008.  By letter of 30 July 2008, HMRC advised that the claim had been refused because it had been submitted “well beyond the legislative deadline”.

12.	The fourth Appellant, Lockton Insurance Agency Inc (“Lockton”), is a company registered in the United States.  In the twelve months ending 30 June 2007, Lockton incurred VAT in the United Kingdom in the sum of £21,007.  The deadline for claiming repayment under the Thirteenth Directive was therefore 31 December 2007.  On 15 December 2007, Meridian submitted a claim for refund of this amount on Lockton’s behalf.  The claim was received by HMRC on 28 December 2007.  By letter dated 8 January 2008, HMRC returned the claim form on the basis that a certificate of taxable status was not included.  HMRC further advised that the completed claim form must be received within the legislative deadline and that the deadline for the submission of the claim had by then passed.

The issues in summary

13.	The four Appellants contend that their applications for repayment, submitted under the Eighth and the Thirteenth Directives as the case might be, were valid and should therefore be treated as effective claims.  HMRC had wrongly relied on the FACEVET procedure in rejecting the applications.  This was because the FACEVET formalities had resulted in discriminatory treatment of overseas businesses seeking refunds of UK VAT under those two Directives as compared with UK taxable persons seeking refunds of VAT.  On that basis HMRC’s FACEVET policy relating to the processing of claims was incompatible with EC law and legislation.

14.	HMRC’s response was that the FACEVET scheme had not imposed a new and more onerous requirement on overseas businesses; rather, it had been introduced to ensure that claims for repayment that did not comply with the requirements of the respective Directives were identified as quickly as possible.  In legal terms, however, the introduction of FACEVET had minimal significance.  In any event, say HMRC, there was no discrimination in the relevant sense.  While accepting that the right of a person to obtain refund of VAT paid in another Member State under Article 2 of the Eighth Directive is the counterpart of the right granted to that person under Article 168 of the VAT Directive to deduct input tax in his own Member State, HMRC say that the exercise of those rights is governed by the different regimes set down in each of those two Directives.  There are necessarily differences between those regimes and that is explicable by the different situations that they provide for.  

15.	Regarding the Thirteenth Directive, HMRC say that the FACEVET requirements is not discriminatory.  The primary requirement of the Thirteenth Directive, in Article 3.2, is that refunds must not be granted under conditions more favourable than those applied to Community taxable persons; any differential treatment afforded to third country traders as distinct from that afforded to traders based in the EU is of even greater significance where the traders are not based in the EU.  The possibilities afforded to the UK tax authorities for checking the credentials and the claims of traders not based in the EU are more limited than they would be in the case of EU based traders.

The Eighth Directive issues: Areva and Canal +

16.	The Areva refund application was, as noted, received by HMRC within three days of the deadline date at the end of June 2007.  It was returned on 11 July because it did not include a valid Certificate of Status; it was therefore, said HMRC, out of time.  The Canal + refusal application was received by HMRC within four days of the deadline.  Eleven days after the deadline it was returned because there was no relevant Certificate of Status and the VAT 65/65A form was unsigned.  It was therefore, said HMRC, out of time.

17.	Areva and Canal +, through Andrew Hitchmough, have challenged HMRC’s approach.  Both companies must, it is contended, be treated as having made “claims” for purposes of the Eighth Directive.  To deny their claims would result in their being treated, as non-resident claimants, in a less favourable manner than a “domestic” UK trader making a comparable claim for input tax.  The result would be a violation of the principle of fiscal neutrality because they would in effect have lost the right to input tax deduction.  There would be discrimination against those two companies as non-domestic traders (to which we refer generally as “non-domestics”) because they, unlike their domestic competitors, would lose the right to a deduction.  Areva and Canal + rely on the following passage from paragraph 70 of the Opinion of the Advocate General (Tesauro) in Debouche (Case C-302/03)[1996]STC 1406:
“… the refund of VAT to taxable persons who are not established in the territory of the country is based on the same rationale and must, therefore, be subject to the same rules as apply to deduction made by a taxable person who is established in the country”.

They also rely on the judgment of the ECJ in Societe Generele des Grandes Sources d’Eaux Minerale Francaises.  In that case the Court referred, at paragraph 34, to the principle of non-discrimination before adding that:
“… it is settled law that discrimination can arise only through the application of different rules to comparable situations or the application of the same rule to different situations.”

The issue there was whether a taxable person established in one Member State might prove his entitlement to a refund of VAT from another Member State under the Eighth Directive by submitting a duplicate or photocopy of the invoice if the original which he received has “been lost for reasons beyond his control”.  The Court, at paragraph 38, observed that – 

“The principle of non-discrimination set out in Article 6 of the Treaty and referred to in the fifth recital in the preamble to the Eighth Directive requires that the same possibility be extended to taxable persons not established in that Member State …”.

18.	On that basis, it was argued for both Areva and Canal +, they are both in a comparable situation when compared with the domestic trader.  The domestic trader who is registered or is required to be registered is able to obtain his relief when his claim for input tax is submitted.  And this will be so even if he is not actually registered, though required to be registered.  This is the effect of regulation 25 of VAT Regulations 1995.  HMRC’s refusal to process an Eighth Directive repayment application made by a non-domestic trader without giving him the chance to establish that he was entitled to a Certificate of Status is therefore discriminatory.  

The Thirteenth Directive issues : Gilead and Lockton

19.	The Gilead refund application was, as noted, submitted some twelve days before the deadline date at the end of 2007: it was rejected on 8 January 2008 on the grounds that the invoices submitted did not show amounts in sterling.  

20.	The Lockton refund application, submitted 15 December 2007, was received by HMRC on 28 December 2007 and rejected on 8 January 2008 on the grounds that it did not include a Certificate of Business Status.

21.	The case for Gilead starts by noting that a claim for a refund under the Thirteenth Directive must be supported by evidence equivalent to that required of a domestic trader for the purposes of establishing its right to deduct input tax.  So far as the assumed domestic trader is concerned the United Kingdom VAT legislation allows the use of other evidence to support a claim for input tax where the original invoice is not available (see Regulation 29(2)).  Whether to accept such alternative evidence lies with the discretion of HMRC.  The HMRC Internal Manuals deal with the exercise of this discretion providing (Volume VI-XIII Section 8.11 “Alternative Evidence”) that:

“Where a claim is not supported by proper evidence (including claims supported by invalid VAT invoices) officers must always exercise their discretion and consider whether or not satisfactory alternative evidence is available to justify a deduction.  If officers simply reject claims without having fairly and reasonably considered all the circumstances, their assessments will not be upheld by the courts.”

The Manuals then go on to explain that in exercising the discretion given to them officers must ask themselves whether there is sufficient alternative evidence that the supply in question, in respect of which the input tax in question is claimed, did in fact take place.  And where an invoice exists, being one that does not satisfy the strict requirements of a VAT invoice, a claim for input tax is allowed provided “… the error is of a minor nature”.  Examples given of minor errors include the lack of an identification number, the lack of the customer’s name and address and the lack of the tax point.  With those factors drawn from the Manual in mind, the argument for Gilead is that the absence of the relevant invoice of amounts denominated in £sterling, such as happened in this appeal, it is just an “error of a minor nature”.  On that basis the circumstances at issue in the Gilead appeal are precisely those where a comparable claim to input tax by a domestic trader would be allowed.  

22.	So far as concerns the Lockton application, the same argument is advanced as was presented in relation to the Eighth Directive issues involved in the appeals of Areva and Canal +.  

Statutory provisions relevant to the issues

23.	Before addressing HMRC’s justification for their application of FACEVET procedures in relation to all four Appellants, we need to summarise the statutory provisions relevant to the repayment applications.  We start with the general provisions.

24.	Article 9 of Directive 2006/112/EC (“the VAT Directive”) defines taxable person to mean “any person who, independently, carries out in any place any economic activity …”.  Article 168 of the VAT Directive gives the taxable person the right to deduct the VAT incurred by him in the five situations specified in that Article.  Article 169 re-enacts Article 17(3) of Directive 77/388 (“the Sixth Directive”).  So far as is relevant Article 17.3 provided:

“Member States shall also grant every taxable person the right to the deduction or refund of the value added tax referred to in paragraph 2 so far as the goods and services are used for the purposes of :

(a)	transactions relating to the economic activities referred to in Article 4.2, carried out in another country, which would be deductible if they had been performed within the territory of the country.”

The Sixth Directive further provided in Article 17.4 that:
“4.	The refund of value added tax referred to in paragraph 3 shall be effected:

–	to taxable persons who are not established within the territory of the country but who are established in another member State in accordance with the detailed implementation rules laid down in Directive 79/1072/EEC.
–	to taxable persons who are not established in the country of the Community, in accordance with the detailed implementing rules laid down in Directive 86/560/EEC”.

The Eighth Directive
25.	Directive 79/1072/EEC (“the Eighth Directive”) provides in relevant part the preamble:
“Having regard to Sixth Council Directive …, and in particular Article 17.4 thereof, 
…
Whereas such rules [as are set out in the body of the Directive] must not lead to the treatment of taxable persons differing according to the Member State in the territory of which they are established; 
…
Whereas certain forms of tax evasion or avoidance should be prevented”.

Article 2 of the Eighth Directive provides that – 
“Each Member State shall refund to any taxable person who is not established in the territory of the country but who is established in another Member State, subject to the conditions laid down below, any value added tax charged in respect of services or moveable property supplied to him by the other taxable persons in the territory of the country or charged in respect of the importation of goods into the country, insofar as such goods and services are used for the purposes of the transactions referred to in Article 17.3(a) and (b) [of the Sixth Directive] and of the provision of services referred to in Article 1(b).”

Article 3 of the Eighth Directive contains the rules for qualifying for refund.  Under these the “non-domestic” trader is to submit his application for repayment in the prescribed form.  By Article 3(b) he is to produce evidence, in the form of a certificate issued by the official authority of the State in which he is established, that he is a taxable person for purposes of VAT in that State.  By Article 3(c) he is to certify by written direction that he has supplied no goods or services in the territory of the country in which his refund application is made.  Finally, by Article 3(b) the taxable person making the application is to undertake to repay any sum collected in error.

26.	Article 7 of the Eighth Directive contains the time limits which are, as already noted, that applications are to be submitted within six months of the end of the calendar year in which the tax became chargeable.  

The Thirteenth Directive
27.	The Thirteenth Directive provides, so far as is relevant:
“Article 2 

1.	Without prejudice to Articles 3 and 4, each Member States shall refund to any taxable person not established in the territory of the Community, subject to the conditions set out below, any value added tax charged in respect of services rendered or moveable property supplied to him in the territory or the country by other taxable persons or charged in respect of the importation of goods into the country, insofar as such goods and services are used for the purposes of the transactions referred to in Article 17.3(a) and (b) [of the Sixth Directive] ….

Article 3

1.	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 of which applications should cover, the authority competent to receive them and the minimum amounts in respect of which applications may be submitted.  They shall also determine the arrangements for making refunds, including the time limits for doing so.  They shall impose on the applicants obligations as are necessary to determine whether the application is justified and to prevent fraud, in particular the obligation to provide prove that he is engaged in an economic activity in accordance with Article 4.1 of [the Sixth Directive].  …

2.	Refunds may not be granted under conditions more favourable than those applied to Community taxable persons .”

Domestic provisions

28.	The provisions of the Eighth and Thirteenth Directives have been implemented in domestic law by section 39 VAT Act 1994.  This directs that HMRC may provide for the repayment, to persons carrying on business in other Member States of the European Union and persons carrying on business in other countries, of VAT on supplies to them in the UK which would be input tax if they were taxable persons in the UK; such provision is to be by means of a scheme embodied in regulations.

29.	As regards Eighth Directive claims, the Regulations made under section 39 are Regulations 173 to 184 of the VAT Regulations 1995, coming under Part XX of those Regulations.  The relevant Regulations as regards Thirteenth Directive claims are Regulations 185 to 194, coming under Part XXI of the Regulations.

30.	Common to both Parts XX and XXI are references to requirements to the documentary evidence of a “domestic” entitlement to deduct input tax required in accordance with the provisions of Regulation 29.  Regulation 29 in turn needs to be read with Regulations 13 and 14.  These Regulations in relevant part provide that:

“13(1)	Save as otherwise provided by these Regulations, where a registered person … makes a taxable supply in the United Kingdom to a taxable person … he shall provide such persons as are mentioned above with a VAT invoice … 

14(1)	Subject to paragraph (2) below and regulation 16 and save as the Commissioners may otherwise allow, a registered person providing a VAT invoice in accordance with Regulation 13 shall state thereon the following particulars – 

… 

(g)	a description sufficient to identify the goods or services supplied, 
(h)	for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency,
(i)	the gross amount payable, excluding VAT, expressed in any currency, 
(l)	the total amount of VAT chargeable, expressed in sterling.

29(1)	Subject to paragraph (1A) below, and save as the Commissioners may otherwise allow or direct either generally or specially, a person claiming deduction of input tax under section 25(2) of the Act shall do so on a return made by him for the prescribed accounting period in which the VAT became chargeable save that, where it has not at that time hold the document or invoice required by paragraph  (2) below, he shall make his claim on the return for the first prescribed accounting period in which he holds that document or invoice.”

Conclusions

31.	We start by addressing the issue of whether HMRC’s application of the FACEVET requirements to an Eighth Directive application violate the principles of non-discrimination in the manner asserted for the relevant Appellants.

32.	It is common ground that the right of a person to obtain a refund of VAT made in another Member State under Article 2 of the Eighth Directive is the counterpart of the right granted to that person under Article 168 of the VAT Directive enabling such person to deduct input tax in his own Member State.  That is the effect of the decision of the ECJ in Planzer Luxemburg (Case C-73/06) where the Court noted that the aim of the Eighth Directive is to establish “detailed rules” for reimbursement of VAT paid in a Member State by taxable persons established in another Member State and to harmonise the right to refund arising from Article 17.3 of the Sixth Directive.  The Court went on, in paragraph 35, to emphasise that the right of a taxable person established in a Member State to obtain refund of VAT paid in another Member State, in the manner governed by the Eighth Directive, was the “counterpart” of such a person’s right established by the Sixth Directive to deduct input tax in his own Member State.  The Court concluded in paragraphs 39-40 that the production of a tax certificate in accordance with the specimen attached to the Sixth Directive established a presumption that the person was liable to VAT in the issuing country and was established there; and that presumption in principle bound the tax authority of the reimbursing state in fact and law.

33.	But is the exercise by the non-domestic trader to obtain a refund of VAT paid in the UK under Article 2 of the Eighth Directive comparable to the right given to the domestic trader to deduct input tax given under Article 168 of the VAT Directive?  Is it, to use the words of the Court in Societe Generele, a case of “the application of different rules to comparable situations?  We think not.

34.	We start with the requirements for a Certificate of Status.  It will be noted that, unlike the position under the Eighth Directive, the VAT Directive does not require a person to produce a Certificate of Status in order to be able to deduce input tax.  Rather, in principle, such deductions are made by way of completion of the domestic VAT return provided for in Article 250 of that Directive: see Articles 178 and 179 of the VAT Directive.   To establish his entitlement to submit a VAT return under Article 250, the person in question must first have been able to establish that he is a taxable person for purposes of Article 9.1 of the VAT Directive.  That is a process which is carried out at the time of registration and, once carried out, remains valid until the person in question is deregistered.  It would therefore be unnecessary for a person to submit a Certificate of Status with each VAT return.  It is not surprising therefore that the concept of a Certificate of Status equivalent to that provided for in Article 3(b) of the Eighth Directive does not appear in the VAT Directive.  The Eighth Directive, by contrast, explicitly provides for the supply of a Certificate of Status with each application for repayment (subject to a proviso that a certificate need not be provided for a period of one year from the date of issue of that certificate if the taxing authority already has evidence of the taxable status of the applicant).  The Certificate of Status enables the taxing authority to be satisfied that the applicant is a taxable person in his country of establishment.  It is self-evident that this is necessary because the taxing authority does not have the equivalent power to scrutinise the taxable status of a non-domestic applicant as it would have in respect of a domestic applicant.

35.	It is significant also that paragraph 7.1 of the Eighth Directive sets down a specific time frame for the submission of non-domestic traders for refunds of VAT.  That time frame is different from the one provided for domestic traders by Article 252 of the VAT Directive.  This is explicable because domestic traders make regular tax returns at the end of each tax period and have the right to make corrections in later returns under, for example, regulation 34 of the VAT Regulations.  The regime for non-domestic applicants is different.  They have a much longer time over which to make their application. This is because they may only be making infrequent and possibly one-off requests for refunds.

36.	From those observations we are satisfied that different rules apply to domestic and non-domestic applications for refunds of VAT, because the situations of the two are different.  The policies of HMRC towards domestic traders on the one hand and non-domestic applicants on the other reflect a different rule expressly provided for in the relevant Directives, and in the circumstances any differences between the two cannot, we think, be said to infringe the principle of non-discrimination.

37.	Does the requirement that the invoices adduced in support of a claim for repayment include values expressed in sterling constitute the imposition of a differential treatment?  Article 230 of the VAT Directive specifically provides that, whilst the amounts that appear on a VAT invoice may be expressed in any currency, the amount of VAT payable is expressed in the national currency of the Member State in which the supply of goods or services takes place.  There is no discrimination here.  This requirement applies equally in respect of domestic claims for the repayment of VAT (see Regulations 13, 19 and 29 of the VAT Regulations) and in respect of overseas claims (Regulation 178(1)(a), regarding EU traders, and Regulation 191(1)(a) regarding non-EU traders).

38.	Turning now to the Thirteenth Directive we note that its provisions are less comprehensive than those set down in the Eighth Directive.  The former does not include, for instance, the equivalent to the recital in the Eighth Directive regarding non-discrimination.  The primary requirement of the Thirteenth Directive is that contained in Article 3.2, namely that refunds must not be granted under conditions more favourable to those applied to Community taxable persons.  We have already noted that there is justification underpinning differential treatment as between domestic and non-domestic traders generally.  This is of even greater significance where those traders are not based in the EU.  This is because, as HMRC have stressed, the possibilities afforded to the UK tax authorities of establishing the credentials of non-domestic traders established outside the EU and of their claims are even more limited than they would be in the case of non-domestic traders based within the EU.

39.	With those observations in mind (and here we are referring to the issues arising in relation to both the Eighth and the Thirteenth Directives) we are satisfied that there has been no such breach of the principle of fiscal neutrality or of the rules against discrimination that requires us to read the domestic UK rules in a way that avoids such breaches.

Areva and Canal +

40.	We now turn to the FACEVET procedure in relation to the applications for refund made by these two non-domestic traders under the Eighth Directive.

41.	Reading Article 7 of the Eighth Directive, and in particular Article 7.4, without any attempt to construe it in a way that prevents discrimination against non-domestic traders, we are satisfied that the claim or application under the Eighth Directive is made when and only when all the documents required for examination of the application have been submitted to HMRC.  Only then does time run against HMRC [and only then may decisions concerning the application in question be answered].  We mention in this connection the decision of the VAT and Duties Tribunals in Arm Inc v HMRC (VAT Dec 20238).  There the tribunal had to consider in relation to a claim under the Thirteenth Directive when such claim could be said to have been “made” The tribunal considered, at paragraph 37, that a claim is made when the application form and the relevant supporting document are despatched (rather than when they are received by HMRC), so long as they are despatched in such a manner as with reasonable certainty will ensure prompt delivery.  However, on the facts of that case, the tribunal concluded that the claim had not been made within time.  This was because the necessary Certificate of Status had not been provided at the time when the claim was despatched, such that “it did not make a satisfactory claim on time or at all.”  We also mention the decision of the Tribunal in Nova Stamps v Customs and Excise Commissioners (VAT Dec 15394) where it was held that the provisions of Article 7.1 of the Eighth Directive are mandatory and do not provide for any discretion to extend the time limit, even in special circumstances.  The decision further provides that the provisions of Regulation 179(1) of the VAT Regulations 1995 are similarly mandatory and do not provide for any discretion.

42.	It follows, we think, that the applications of Areva and Canal + were not validly submitted for purposes of Article 7 of the Eighth Directive by the deadline date provided for under Article 7.1.

43.	We add, as regards the issue over the Canal + application, that Canal + was in a weaker position than Areva.  This is because there was no signature on the relevant form, being a signature required by Article 3(a) of the Eighth Directive read together with the model form at Annex A to that Directive.

Gilead

44.	It will be recalled that Article 3.2 of the Thirteenth Directive provides that refunds under the Thirteenth Directive are not to be granted “under conditions more favourable than those applied to Community taxable persons”.  It follows that whilst Article 3.1 of the Thirteenth Directive makes no mention as to the time period which can be imposed by Member States of the EU for claims for repayment to be made, that time period cannot be longer than the time period imposed in respect of a claim made under the Eighth Directive.  Bearing in mind that the maximum period for bringing a claim under the Eighth Directive is six months, the UK must therefore be entitled by virtue of Article 3.1 of the Thirteenth Directive to impose (by Regulation 191(1) of the VAT Regulations 1995) a six month time period for the bringing of claims, notwithstanding any impact that that might have on the ability of non-domestic traders based outside the EU to bring claims. 

45.	We have already observed that a claim is not made under Regulation 191(1) of the VAT Regulations unless and until all the relevant documents required by Part XXI of those Regulations are provided.  That is the effect of Arm Inc.  It is also a fact that Gilead did not submit supporting invoices containing values in sterling until after the deadline date.  HMRC are, expressly, entitled to require that the invoices contain the relevant values expressed in sterling by virtue of Article 231 of the VAT Directive, together with (for domestic purposes) Regulations 29 and 191(1)(a) of the VAT Regulations 1995.

46.	It follows from those factors that the application was not validly submitted for purposes of Article 3.1 of the Thirteenth Directive within the time limitations provided for under Regulation 192(1).  

Lockton

47.	The failure to provide HMRC with a certificate of taxable status by the deadline (the end of 2007) means that Lockton did not submit a valid application within time.  The claim was not made under Regulation 191(1) unless and until all the documents required by Part XXI of the VAT Regulations are provided; that did not happen prior to the deadline date for making the claim.  Consequently HMRC were, we think, correct in law in refusing the application.  

48.	For the reasons given above we dismiss all four appeals.  This is a full decision.

49.	The four Appellants have the right to apply for permission to appeal against this decision pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this Decision Notice.

SIR STEPHEN OLIVER QC
TRIBUNAL JUDGE
RELEASE DATE: 26 March 2010