[2013] UKFTT 166 (TC)
TC02582
Appeal number: TC/2011/00405
VAT – S80 Claim for a refund – question if claim was
made within statutory time limit – Appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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H & W STAFF
SPORTS & RECREATION ASSOCIATION
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE IAN HUDDLESTON
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Sitting in public in Belfast on 13 June 2012
Ms. Kim Tilling, HMRC
Mr. Lowry, Halliday Lowry Architects
© CROWN COPYRIGHT
2012
DECISION
Appeal
1. The
decision under appeal in this case is HMRC’s rejection of the Appellant’s claim
to recover overpaid value added tax (“VAT”) in the sum of £9,262.13 for the
periods 16 August 2003 to the 5 December 2005.
2. That
decision was communicated to the Appellant by way of a letter dated the 12 August
2010 and was confirmed on review.
Background Facts
3. The facts
are as follows.
4. The
Appellant is a company limited by guarantee, operating from premises at 6-10 Dundela Avenue, Belfast, BT1 3BQ and, as its name suggests, is a sports and recreation
association. It is registered for VAT under VAT Registration Number 252024993.
5. It would
appear that on the 27 September 2010 HMRC received a letter (“the September
2010 letter”) from the Appellant’s representatives, Messrs. Halliday Lowry,
Accountants, enclosing a copy of an earlier letter dated the 16 August 2006.
That earlier letter (“the August 2010 letter”) purported to be a letter of
claim in respect of overpaid VAT for the period 16 August 2003 to the 5
December 2005 and was made under Section 80 of the Value Added Tax Act 1994
(“VATA”).
6. The origins
of the claim arose out of the ECJ decision in the Linnewebber appeal and
was for the total amount of £9,262.13.
7. The
September 2010 letter referred to the August 2010 letter as a “letter of
appeal” and advised that neither the Appellant nor their representatives had
received a reply to that earlier letter.
8. HMRC’s
position is that after receipt of the September 2010 letter that they conducted
a search and concluded that no claim had previously been received in connection
with the Appellant or, indeed, the subject matter and, accordingly, no decision
had been issued nor claim lodged.
9. On that
basis, HMRC wrote to the Appellant on the 12 October 2010 rejecting the claim
indicating that it fell outside the statutory time limits imposed by Section 80
VATA.
10. By their letter of the 26
October 2010 the Appellant’s representatives sought a review of the decision.
That review was conducted and, by way of a letter of the 10 December 2010, the
original rejection was confirmed.
Legislation
11. Section 80 of VATA provides
as follows:
“(1) 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.
(4) The Commissioners shall not be
liable on a claim under this Section:
… (b) or
repay an amount to a person under sub section (1)(b) above
if the
claim is made more than three years after the relevant date.”
12. For the purposes of this
appeal the “relevant date” (which is defined in Section 80(4)Z(a) is not in
dispute and is the 30 September 2006.
13. The only other statutory
provision which is relevant is Regulation 37 of the Value Added Tax Regulations
1995 (“the Regulations”) which states as follows:
“Any claim under Section 80
of the Act shall be made in writing to the Commissioners and shall, by reference
to such documentary evidence as in the possession of the claimant, state the
amount of the claim and the method by which that amount was calculated.”
HMRC’s Case
14. HMRC’s case is relatively
straightforward. Their position is that the claim first came to their
attention by virtue of the letter which they received from Halliday Lowry on
the 24 September 2010 and that as that was clearly after the statutory cut off
date of 30 September 2006 it is out of time.
15. HMRC take the view that
whilst it is asserted by the Appellant that the letter of 16 August 2006 was
sent, that the onus of proof in that regard rests with the Appellant and that
they neither have discharged that, nor have they provided documentary evidence
to demonstrate the assertion that the August 2006 letter was, in fact, sent.
16. In the alternative, HMRC
contends that if the claim was made within the legislative time limits, that it
was not a valid claim insofar as it did not satisfy Regulation 37 in that:
(1) it did not provide the
methodology in respect of which the claimed amount was calculated; and
(2) it failed to reference the
documentary evidence which was required to support the claim.
17. In support of HMRC’s
argument that the Appellant has failed to demonstrate that a claim was made
(and if made that it was made timeously) HMRC rest on a number of facts:
(1) that HMRC’s letter of 24
September 2010 referred to the August 2006 letter as being a letter of appeal,
and not a letter of claim;
(2) that the copy letter of the
16 August 2006, signed by Mr. McCormick, the Club Treasurer, is wrongly
addressed to HM Customs & Excise;
(3) that the letter dated 16
August 2006 is pre-dated and therefore is not accurate as to the date upon
which it was (if, in fact, it was) sent;
(4) that there was considerable
delay between the alleged submission date of 16 August 2006 and HMRC’s letter
of the 24 September 2010 effective “chasing up” the claim – notwithstanding
that there were opportunities, for example a VAT visit which took place on the
13 March 2008 – when the query could in fact have been raised; and finally
(5) that there is no
corroborative documentary evidence which establishes the making of the claim.
18. As to the case law in this
area, the Tribunal was referred by HMRC to Metal Treatments (Birmingham)
Limited (VTD 18614) by way of confirmation that the burden of proof lies
with the Appellant as to the making of a claim, with that burden then being
discharged (or not) on a balance of probabilities.
19. As regards the legal test
for satisfaction of Regulation 37, we were referred to the case of Nathaniel
& Co. Solicitors (TC 00734) to establish the proposition that the test
for satisfaction of Regulation 37 is an objective test, ie. did the claim
contain sufficient information to allow a reasonably competent officer to
understand the way in which the amount claimed had been calculated.
20. HMRC’s case is that neither
the burden of proof for submission of a claim, nor the legal test of what
constitutes a claim, has been satisfied.
The Appellant’s Case
21. I have said that HMRC’s case
is relatively straightforward. The Appellant’s case is equally straightforward
– they assert that the letter of 16 August 2006 was, in fact, signed and posted
and that it constituted a valid claim pursuant to Regulation 37 and was
submitted within the time limits stipulated by Section 80(4) VATA.
22. The Appellant’s were
represented by Mr. Lowry of Halliday Lowry, Accountants.
23. Mr. Lowry opened the
Appellant’s case by explaining matters insofar as he could from his own file.
24. He explained that, as a
result of the Linnewebber case he had written to a number of clients,
including the Appellants, alerting them to the possibility of making a claim
for overpaid VAT based on the decision in that case.
25. In the present case, we were
provided with a copy letter from Mr. Lowry’s file dated the 16 August 2006
(being the same date as the alleged letter of claim) and addressed to Mr. J.
McCormick at his home address, 70 Moss Road, Ballygowan, BT23 6LF.
26. That letter appeared to be
in a standard form (at least standard insofar as it was common to other letters
which Mr. Lowry sent to similar clients) and enclosed a draft letter which (it
was suggested to Mr. McCormick):
“… you could sign and
forward to the VAT office in order to have a claim in place.”
27. We were then furnished with
a copy of a letter purporting to be from the Appellant, again dated 16 August
2012, addressed to Belfast VAT Office, Custom House, Custom House Square, Belfast, BT1 3ET in the following terms:
“Dear Sir
Following the ECJ decision
in the case of Linnewebber, we wish to make a Section 80 claim for the
repayment of VAT paid on gaming machine takings in the period 16 August 2003 to
5 December 2005 amounting to £9,262.13. The output VAT paid on gaming machine
takings in the period was £12,128.58 and the input VAT recovered on machine
rental in the period was £2,866.45.”
28. The letter was signed J.
McCormick (Treasurer) and was marked at the top (in manuscript) “Copy for J.
McCormick”. It appeared from what Mr. Lowry said that that copy letter was
returned to Halliday Lowry and retained upon their file.
29. Halliday Lowry had, as I
have said above, a number of similar cases, including one involving a similar
club in Bangor, County Down. As Mr. Lowry said, very little happened in
relation to those cases pending the outcome of the decision in Rank Group
plc.
30. It would seem, from what Mr.
Lowry said, that it was only after the satisfactory settlement of a claim which
Halliday Lowry themselves were doing for that other client, that they were
prompted to write to HMRC to ask about progress in relation to the Appellant’s
claim and led to the September 2010 letter.
31. Mr. Lowry called evidence
from both Mr. McCormick, the Appellant’s Treasurer, and Mr. James McFerran, the
Club Secretary, and both gave sworn testimony.
32. Mr. McCormick gave evidence
to the Tribunal that the 16 August 2006 was a Wednesday (being the date upon
which Halliday Lowry despatched their letter with the enclosed draft to HMRC)
which he then suggested was received at the Club on the Thursday.
33. He gave evidence that he
signed that letter in the Club’s premises and that he left the signed copy for
the Secretary to then post.
34. Mr. McCormick, who had held
the post of Treasurer for in excess of 50 years, gave clear testimony as to his
established practice – which largely was done on a volunteer basis - and which
habitually involved him being at the Club’s premises on Thursdays and again on
Saturdays.
35. As regards the copy letter
which found its way to Halliday Lowry’s file, he gave evidence that that was
filed in the accountant’s file and left for Halliday Lowry to collect as part
of the monthly collection carried out by them when they called to collect the
records which allowed them to undertake the VAT returns for the club.
36. Mr. McCormick also gave
evidence that he was aware of the delay arising out of the process of Rank
through the judicial system, and that, therefore, he wasn’t anticipating an
immediate reply in relation to the claim.
37. After cross examination the
Tribunal asked Mr. McCormick to confirm his recollection of when he received
the letter.
38. He confirmed that the letter
was waiting for him at the Club’s premises – as was customary.
39. At that point the Tribunal
did indicate to him that the copy letter from the accountant’s file which had
been presented to the Tribunal indicated that the correspondence from the
accountant had been posted initially to his home address, and that presumably
the letter had in fact gone to him at that address.
40. Mr. McCormick indicated that
he couldn’t remember the detail, which the Tribunal fully accepts given that
these events happened some five to six years ago.
41. We then heard from Mr. James
McFerran, the Club Secretary, who gave evidence that he both recalled the
letter, because of its importance, and that he wrote the envelope, sealed and
stamped it, leaving a copy marked for Mr. McCormick.
42. Again, Mr. McFerran gave a
very clear picture of his involvement in relation to the Club activities, where
he had worked as a volunteer for approximately 22 years.
43. He gave evidence that he
went to the Club most mornings and that he customarily posted letters on behalf
of the Club. He had, he indicated, an established procedure.
44. It is equally clear,
however, that he did not document any of this and that his evidence was based
on his personal recollection of events some five to six years previously.
45. Because of the significance
of these events, the Tribunal allowed the Appellant some time after the Hearing
within which to review their records to see whether or not there was any
documentary corroboration of the events depicted.
46. We were furnished with,
firstly, a copy of Minutes of the Club meeting of Monday 28 August 2006, which
recorded an apology from Mr. McCormick.
47. There is, however, an
extract within those Minutes in the following terms:
“Possibility we can claim
VAT back on fruit machines of £9,200 through accountant – not sure if we can
get it, but Rep says that a test case has been won in Europe.”
48. We were then furnished with
some trade publications in which the issue was discussed, including specific
direction after the decision in Rank.
49. The letter which we received
from Halliday Lowry also provided details of fire damage in February 2007 which
had been referred to in the witnesses’ evidence.
50. The letter confirmed that
the damage did not affect the office itself, but that the necessary
arrangements became a preoccupation of the officers during the course of a
period of approximately 18 months.
51. In relation to these
observations, HMRC made the following points in reply:
(1) firstly, that the Minute of
the meeting on the 28 August 2006 (some 12 days after the date upon which the
letter was allegedly sent) and that yet it spoke of a claim being made in the
future tense;
(2) that whilst Mr. McCormick
was absent, the minutes recorded that Mr. McFerran was in attendance at that
meeting and, therefore, he could have clarified that point;
(3) as regards the fire, HMRC
took the view that it was largely irrelevant as it did not occur at the time
when the alleged claim was made, and did little to explain the lack of
contemporary documentary evidence.
52. As to case law which was of
assistance to the Appellant, we were referred to Quintain Estates
Development plc (VTD 18877) and the more recent case of Heronslea
Limited v Customs for Her Majesty’s Revenue and Customs (TC 00978).
53. In that latter case, Judge
Redston concluded (in relation to a question whether a return had been validly
made) as follows:
“Once the posting date has
been established, the onus is on HMRC to prove that the return was not
delivered in the normal course of post. HMRC have not discharged this burden
…..”
Decision
54. I have been quite detailed
in terms of the factual dispute before me, but I have adopted that course for
obvious reasons as this case turns very much upon its facts.
55. The question which this
Tribunal must answer is whether or not there is evidence that, on a balance of
probabilities, the Appellant made a claim and, if it did, if that claim was
made within the statutory time limit and if it complied with the requirements
of Regulation 37.
56. In the absence of
documentary evidence, the Appellant necessarily must rely on the testimony of
Mr. McCormick and Mr. McFerran.
57. I found both witnesses
helpful in the extreme, and very clear on what clearly is their very
established routine is the performance of their respective roles for the Club.
58. Nonetheless, I rather fear
that their evidence focused more on that routine than on the issue in question,
ie. whether this particular letter was both signed and dated and then posted to
HMRC. Whilst both gave clear evidence to that effect, nonetheless, I have to
bear in mind that we are speaking of events some five to six years ago and that
both have had considerable challenges in the intervening periods – one,
personally, regarding the loss of his wife, and both collectively in terms of
managing the Club through what clearly was a disruptive period as a result of
the fire incident in 2007.
59. I must also take into
account that I asked Mr. McCormick to repeat his evidence which then I myself
was able to challenge because it transpired that the letter from the
accountants was posted directly to him at his home address and not to the Club
as he originally suggested in his evidence.
60. I make no criticism as to
that, but it is something which I do need to bear in mind.
61. On balance, I have concluded
that both witnesses were focused more on their established procedures and
practices than on the provision of detailed evidence as to this particular
matter, and one can hardly blame them for that given the lapse of time.
62. Taking all of that into
account, however, I am not satisfied that the Appellants have in fact discharged
the onus of proof upon them to establish that on a balance of probabilities the
letter was posted and, therefore, that a valid claim was made within the
statutory time limit.
63. Having established that, it
is entirely reasonable, therefore, to deduce that it may well have been only in
September 2010 that HMRC became aware of the claim.
64. That being the case, it
clearly, at that point, was out of time.
65. Having so found, I dismiss
the appeal.
66. No order as to costs.
67. If you are dissatisfied with
the outcome of the application for permission to appeal the decision in this
appeal, either party has the right to apply to the Upper Tribunal for
permission to appeal. Such an application must be made in writing to the Upper
Tribunal at 45 Bedford Square, London, WC1B 3DN no later than one month after
the date of this notice. Such an application must include the information as
explained in the enclosed guidance booklet “Appealing to the Upper Tribunal
(Tax and Chancery Chamber).
IAN HUDDLESTON
TRIBUNAL JUDGE
RELEASE DATE:
6 March 2013
