Cox v Revenue & Customs [2006] UKVAT V19893 (22 March 2005) 

18990
REPAYMENT  — three year cap — centrally issued assessments issued and paid in the absence of returns — repayment returns rendered more than three years later — were the repayments capped — yes — was a proper claim made for repayment — no — Section 80 VATA 1994 — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

BRIAN ELTON COX	Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

Tribunal:	 Lady Mitting (Chairman)
Rayna Dean MA FCA

Sitting in public in Birmingham on 24 February 2005

Gordon Cutler, chartered accountant, for the Appellant 

James Puzey, of counsel, instructed by the Solicitor’s office of HM Customs and Excise for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	The decision under appeal is that of the Commissioners, contained in a letter dated 6 May 2003, to refuse repayment of VAT said to have been overpaid by the Appellant in periods 04/98, 01/99 and 04/99, the reason for the refusal being that the request for repayment was made more than three years from the date when the VAT was initially paid to the Commissioners.
The Legislation
2.	Section 80 VAT Act 1994 provides that:
(1)	Where a person has paid an amount to the Commissioners by way of VAT which was not VAT due to them they shall be liable to reply the amount to him.
(2)	The Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose.
(3)	Not applicable
(4)	The Commissioners shall not be liable, on a claim made under this section to repay any amount paid to them more than three years before the making of the claim
(5)	Repealed
(6)	A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases.
(7)	Except as provided by this section, the Commissioners shall not be liable to repay any amount paid to them by way of VAT by virtue of the fact that it was not VAT due to them.
3.	Regulation 37 of the Value Added Tax Regulations 1995 provides that
“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 is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.”
The Facts
4.	We heard no oral evidence and we find the facts, which were not in dispute, to be as follows.  Mr Cox was the sole proprietor of Steward Street Café at 109 Wolverhampton Road South, Quinton, Birmingham.  He registered for VAT with effect from 11 July 1997 and deregistered with effect from 26 April 2003.  Mr Cox did not submit any returns for the first five periods following registration.  The first return would have been for a long period (11 July 1997 to 30 April 1998) and the non-submitted returns were therefore for 04/98, 07/98, 10/98, 01/99 and 04/99.  The Commissioners issued central assessments in respect of each period, all such assessments being paid by Mr Cox.  
5.	On 20 March 2002, Mr Cutler, on behalf of Mr Cox, applied for deregistration as his client was trading below the threshold.  Deregistration was refused because the returns for 04/98 to 04/99 were still outstanding.  
6.	By letter date 23 April 2003, Mr Cutler sent in the completed returns for all periods with a covering letter asking if the returns could be processed immediately, that Mr Cox’s outstanding liability be revised and deregistration could be effected.  The application to deregister was granted and Mr Cox was deregistered with effect from 26 April 2003.  
7.	The returns revealed that for periods 04/98, 01/99 and 04/99, in paying the centrally issued assessments, Mr Cox has made overpayments of VAT.  For the remaining two periods of 07/98 and 10/98, he had underpaid.  On the 6 May 2003, the Commissioners wrote to Mr Cox advising him of the overpayments but refusing repayment under Section 80(4) of the 1994 Act.  The relevant dates in respect of each of the three periods are as follows:
(a)	Period 04/98
i.	Central assessment dated 12 June 1998 = £1377 paid 25 September 1998
ii.	Return submitted 23 April 2003 = £796.23 (overpayment = £580.77)
(b)	Period 01/99
i.	Central assessment dated 11 March 1999 = £2,200 paid 12 August 1999
ii.	Return submitted 23 April 2003 = £719.32 (overpayment = £1,480.68)
(c)	Period 04/99
i.	Central assessment dated 11 June 1999 = £2,874 paid 12 August 1999
ii.	Return submitted 23 April 2003 = £837.10 (overpayment £2036.90)
Submissions
8.	Mr Puzey’s submission was that Mr Cox’s claim for repayment has to fail for two reasons.  First, he has not made a valid claim for repayment within the requirements of Regulation 37 and if no claim for repayment has been made, the Commissioners are under no liability to make that repayment.  Secondly, and in any event, the claim for repayment is out of time under section 80(4).  He referred us also to section 80(7) contending that unless a claim for repayment fell within section 80, then no repayment can be made.  
9.	Mr Cutler advised us that Mr Cox owed the Commissioners VAT for later periods in approximately the same sum as the amount which he had overpaid on the centrally issued assessments.  It was Mr Cutler’s contention that Mr Cox was not making a claim for repayment but for a set off.  He accepted that no valid claim within Regulation 37 had been made but maintained that no such claim was necessary.  What Mr Cox was claiming was quite simply a cash adjustment or, in Mr Cutler’s words a “debt contra”.  Mr Cox owed the Commissioners and the Commissioners owed Mr Cox roughly equivalent amounts and the two should be set off against each other.  This did not, in Mr Cutler’s view, constitute a claim for repayment within section 80.  
Conclusions
10.	It is quite clear that no claim for repayment has been made within the technical requirements of Regulation 37, and indeed, as we have said, this is conceded by Mr Cutler.  It is also quite clear that the returns, if they are taken as a claim (albeit technically invalid) for repayment, then the claim in respect of all three periods falls outside the three year time limit imposed by section 80(4).  If, therefore, this were a straight forward claim for repayment, then it would fall under the requirements of section 80 and Regulation 37.  However, Mr Cutler submits that it is no such thing, merely an application for a set off.  We cannot accept this contention.  For there to be a set off, the repayment back from the Commissioners to Mr Cox must actually be due.  To be due, the requirements of section 80 must be met.  If the requirements of section 80 are not met, then no repayment is due (section 80(7)) and no set off can take place.  We appreciate that Mr Cox is a sick man and it may well have been through illness that he did not submit his earlier returns but this cannot negate the necessity to meet the statutory requirements for any repayments or refunds of VAT either by way of set off or by a straight repayment.
11.	Although these are the reasons for our inability to accept Mr Cutler’s arguments, there are two other relevant factors which mitigate against the Appellant.  First, the three year capping applies both ways.  Section 77 (i) of the VAT Act presents the Commissioners from assessing underpaid VAT (in the absence of fraud) after three years have elapsed and they, therefore, have not assessed for the underpaid VAT in the 7/98 and 10/98 quarters.  
12.	Secondly, if Mr Cutler were correct in his contentions, a trader could quite easily manipulate his returns and avoid the capping provisions.  All he would have to do, if he realised that he was out of time for making an application for repayment of VAT, would be to fail to pay his tax on a later return and then claim a set off.
13.	In summary, to be due his overpaid VAT, either by repayment or by set off, the provisions of section 80 must be met and they were not.  The appeal must therefore fail and is dismissed.  Mr Puzey made no application for costs and we make no order.

LADY MITTING
CHAIRMAN
Release Date: 22 March 2005

MAN/03/0530