19572

REPAYMENT OF VAT - person carrying on business in another Member State - claim not made in time - appeal dismissed - EC Eighth Council Directive (79/1072/EEC) Art 7.1; VAT Act 1994, s 39; VAT Regulations 1995 (SI 1995 No. 2518) Reg 179(1)

LONDON TRIBUNAL CENTRE

BERNARD LUNKOWSKY	Appellant

-	and 	–

THE COMMISSIONERS OF
HER MAJESTY'S REVENUE AND CUSTOMS	Respondents

Tribunal:	Nicholas Aleksander   (Chairman)
R L Jennings FCA FTII

Sitting in public in London on 26 April 2006

Mr Lunkowsky in person

My J Hyam of counsel, instructed by the Acting Solicitor of HM Revenue & Customs for the Respondents

© CROWN COPYRIGHT 2006

DECISION
 
1	Mr Bernard Lunkowsky appeals against a decision of HM Revenue & Customs dated 26 September 2005 refusing a claim for the repayment of value added tax amounting to £1034.23 incurred during the course of 2003. The claim was refused because it was not made within the statutory time limits.  
 
2.	The second preamble of the EC Eighth Council Directive on value added tax (79/1072/EEC) ("the Eighth Directive") indicates that rules are required to ensure that a taxable person established in the territory of one Member State can claim for tax which has been invoiced to him in respect of supplies of goods or services in another Member State, and the Directive contains provisions to enable such taxable persons to make such claims. Article 7 contains the time limits and the relevant part of Article 7.1 provides:  
 
 “7.1 … Applications shall be submitted to the competent authority … within six months of the end of the calendar year in which the tax became chargeable.”  
 
 3.	The provisions of the Eighth Directive have been implemented in section 39 of the Value Added Tax Act 1994 ("the VAT Act") which provides that HM Revenue & Customs may provide for the repayment, to persons carrying on business in another Member State, of VAT on supplies to them in the United Kingdom which would be input tax if they were taxable persons in the United Kingdom; such provision is to be by means of a scheme embodied in regulations.  
 
4.	The regulations made under the provisions of section 39 are Regulations 173 to 184 of the Value Added Tax Regulations 1995 (SI 1995 No. 2518) ("the VAT Regulations"). Regulation 179 contains the time limits within which a claim must be made and the relevant part of Regulation 179(1) provides:  
 
 “(1) A claim shall be made not later than six months after the end of the calendar year in which the VAT claimed was charged …”.  
  
5.	At the hearing a bundle of documents was produced on behalf of HM Revenue & Customs; this contained copies of their Statement of Case, the VAT 65 claim form and the disputed decision. 

6.	From the evidence before us and the submissions made by Mr Lunkowsky at the hearing, we find the following facts. Mr Lunkowsky carries on business in Germany selling health products.  He started in this business as a sole trader in 2003 and imported goods from the UK.  Mr Lunkowsky submitted form VAT 65 dated 28 February 2005 claiming a refund for VAT charged in 2003 amounting to £1031.23.  The form was received on 3 March 2005 and HM Revenue & Customs replied on 26 September 2005 to say that the refund could not be authorised because the time limits laid down in Article 7 of the Eighth Directive had not been satisfied. It is from that decision that Mr Lunkowsky appeals.  
 
7.	The arguments for Mr Lunkowsky were that as a sole proprietor starting a small business in Germany, under German law he was not required to prepare or file VAT returns in Germany for two years following the commencement of his business.  Accordingly he did not prepare any German VAT returns until early in 2005.  He was not aware (and had no reason to believe) that the rules in the United Kingdom relating to VAT returns would be any different.   As a small sole trader Mr Lunkowsky could not afford to pay for advice from an international tax consultant, and had to find out how to claim UK VAT refunds through the Internet.  Eventually Mr Lunkowsky found the relevant details and submitted his claim to HM Customs & Excise.  Mr Lunkowsky also told us that during this period he had moved his business from Munich to Rosenheim, which caused a degree of disruption. 
 
8.	For HM Revenue & Customs, Mr Hyam submitted that Article 7.1 of the Eighth Directive provided that applications “shall” be submitted within six months of the end of the calendar year in which the tax was chargeable; the provisions had been implemented in section 39 of the VAT Act and also in Regulation 179(1) of the VAT Regulations which repeated the requirement that a claim “shall” be made within the six month period. It followed that claims for repayments of value added tax charged in 2003 had to be made on or before 30 June 2004; Mr Lunkowsky's claim was received on 3 March 2005, which was well outside the time limit. The use of the word "shall" indicated that the time limit was mandatory and HM Revenue & Customs had no discretion to extend it. In support, Mr Hyam cited Nova Stamps AB v The Commissioners of Customs and Excise (1997) VAT Dec. No. 15304.  
 
9.	We agree with Mr Hyam's submission 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. The provisions of Regulation 179(1) are likewise mandatory and do not provide for any discretion to extend the time limits. The tribunal decision in Nova Stamps AB was based on similar facts, where a Swedish trader applied for a refund of UK VAT under the Eighth Directive well after the expiry of the statutory time limit.  In that appeal the tribunal held that the six month time limit was mandatory.  
 
10.	We briefly explored with Mr Hyman whether there was a possibility that HM Revenue & Customs had a general discretion to extend the time limit pursuant to their powers of care and management under Schedule 11, Paragraph 1(1), VAT Act.  Mr Hyman submitted that even if they had such a discretion (and he did not consider that they did), the tribunal had no jurisdiction to review decisions taken under the exercise of any general discretion given by those provisions. 

11.	We conclude that the provisions of Article 7.1 of the Eighth Directive and of Regulation 179(1) are mandatory and do not contain any provision for the exercise of a discretion to extend them.  We do not express any view about whether the provisions of  Schedule 11, Paragraph 1(1), VAT Act, give HM Revenue & Customs a general discretion such as would enable them to extend the time limits, as that point was not fully argued before us, but even if they did, then a refusal to exercise such a discretion is not a matter which can be reviewed by the tribunal.  
 
12.	The appeal is dismissed. There is no order as to costs.

13.	Finally, we would note that the appeal related to the supply of goods which were exported from the UK to Germany.  If Mr Lunkowsky was registered and liable to VAT in Germany in respect of his business at the relevant time, and can prove that the goods were exported, then it may be the case that VAT should not have been levied on the supply of those goods to him in the first place.  This point is made by HM Revenue & Customs in their letter of 26 September 2005, and is something that Mr Lunkowsky may wish to explore further with his suppliers.

NICHOLAS ALEKSANDER
CHAIRMAN

RELEASED: 10 May 2006

LON/2006/0038