In Lloyds Banking Group and others v HMRC [2019] EWCA Civ 485 (21 March 2019), the Court of Appeal found that only the representative member of a group (to the exclusion of the real-world supplier) can make a claim for repayment under VATA 1994 s 80.
Under CJEU case law, where a member state has levied unlawful duties or taxes, it must reimburse a claimant who has paid those taxes. This right is generally referred to as the San Giorgio right, after the judgment in SpA San Giorgio [1983] ECR 3595. The issue was who has a right to claim back the tax in a situation where the goods or services on which the tax was wrongly levied were supplied by a company which belonged to a VAT group (so that the input tax was accounted for by the representative member) and the real world supplier has left the VAT group at the time the claim is made.
HMRC had accepted the claims for the refund of overpayments made by the representative member but had refused claims by real world suppliers that had left the VAT group. The UT had upheld HMRC’s interpretation, which was strengthened by the recent Supreme Court decision in Taylor Clark [2018] UKSC 35. Although the appellants accepted that the Supreme Court decision was binding, they contended that VATA 1994 ss 43 and 80 infringed EU law (an issue not considered by the Supreme Court) and should therefore be construed to bring them in compliance with EU law (applying Marleasing (Case C-106/89)).
The Court of Appeal found that the Principal VAT Directive art 11 does not provide that the single taxable person created by the VAT grouping provisions operates in such a way that any San Giorgio rights are held by the real-world suppliers, so that those suppliers take the rights with them when they leave the VAT group. Sections 43 to 44, which provide that only the representative member can make a s 80 claim, therefore comply with art 11. It added that a court may need to consider a claim brought against a representative member by a real-world supplier that has reimbursed the VAT to its own customers, and seeks a remedy against the representative member that accounted for that VAT to HMRC. None of the appellants was in that position, however. Finally, the court noted that in circumstances where the group has been dissolved, the last representative member can bring a claim, whether or not it is the same legal entity as fulfilled that role at the time of the supplies and whether or not it is still a taxable person.
Why it matters: This lengthy decision (177 paragraphs) hopefully puts an end to this judicial saga. Thankfully, it confirms that the UK statutory fiction of considering the representative member of a group as the only taxable person still holds true. It is also a very exhaustive and therefore useful recap on VAT grouping, and perhaps more importantly on the principles applying to repayments of tax.
In Lloyds Banking Group and others v HMRC [2019] EWCA Civ 485 (21 March 2019), the Court of Appeal found that only the representative member of a group (to the exclusion of the real-world supplier) can make a claim for repayment under VATA 1994 s 80.
Under CJEU case law, where a member state has levied unlawful duties or taxes, it must reimburse a claimant who has paid those taxes. This right is generally referred to as the San Giorgio right, after the judgment in SpA San Giorgio [1983] ECR 3595. The issue was who has a right to claim back the tax in a situation where the goods or services on which the tax was wrongly levied were supplied by a company which belonged to a VAT group (so that the input tax was accounted for by the representative member) and the real world supplier has left the VAT group at the time the claim is made.
HMRC had accepted the claims for the refund of overpayments made by the representative member but had refused claims by real world suppliers that had left the VAT group. The UT had upheld HMRC’s interpretation, which was strengthened by the recent Supreme Court decision in Taylor Clark [2018] UKSC 35. Although the appellants accepted that the Supreme Court decision was binding, they contended that VATA 1994 ss 43 and 80 infringed EU law (an issue not considered by the Supreme Court) and should therefore be construed to bring them in compliance with EU law (applying Marleasing (Case C-106/89)).
The Court of Appeal found that the Principal VAT Directive art 11 does not provide that the single taxable person created by the VAT grouping provisions operates in such a way that any San Giorgio rights are held by the real-world suppliers, so that those suppliers take the rights with them when they leave the VAT group. Sections 43 to 44, which provide that only the representative member can make a s 80 claim, therefore comply with art 11. It added that a court may need to consider a claim brought against a representative member by a real-world supplier that has reimbursed the VAT to its own customers, and seeks a remedy against the representative member that accounted for that VAT to HMRC. None of the appellants was in that position, however. Finally, the court noted that in circumstances where the group has been dissolved, the last representative member can bring a claim, whether or not it is the same legal entity as fulfilled that role at the time of the supplies and whether or not it is still a taxable person.
Why it matters: This lengthy decision (177 paragraphs) hopefully puts an end to this judicial saga. Thankfully, it confirms that the UK statutory fiction of considering the representative member of a group as the only taxable person still holds true. It is also a very exhaustive and therefore useful recap on VAT grouping, and perhaps more importantly on the principles applying to repayments of tax.
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