Revenue

Insurance premium tax no claim for restitution by person other than taxpayer no appeal after tax paidCommissioners of Customs and Excise v Cresta Holidays Ltd and Others: ChD (Lightman J): 2 February 2001The respondents, which carried on business as tour operators and providers of travel insurance, entered into long-term contracts with various insurance companies which provided that: (i) the respondents were free to set the premiums payable by holidaymakers according to market conditions; (ii) regardless of the levels at which premiums were set, an agreed cost per policy was to be paid to the insurers, together with a sum equal to the insurance premium tax (IPT) chargeable on the premiums at the prevailing rate; and (iii) the balance of the money collected by the respondents could be retained by them as commission.

In 1997 the rate of IPT on travel insurance went up from 2.5% to 17.5% when sold by a tour operator, travel agent or connected person and 4% when sold by anyone else, although in 1998 that differential rate was held to be an unlawful state aid.The respondents sought restitution of moneys equal to the difference between the standard and higher rates of IPT prior to the decision invalidating the differential rates, (a cost borne by the respondents under the terms of their contracts with the insurers).

When this was refused the respondents applied to the VAT and Duties Tribunal.

The commissioners applied to strike out the application on the basis that it was made without jurisdiction.Paul Lasok QC and Michael Patchett-Joyce (instructed by the Solicitor of Customs and Excise) for the commissioners.

Gerald Barling QC and Michael Conlon (instructed by Slaughter and May) for the taxpayers.Held, allowing the appeal, that there were two distinct and mutually exclusive regimes applicable where the entitlement of the commissioners to payment of IPT was in issue, under section 59(1)(b) or section 59(1)(1); that appeals under section 59(1)(b) were intended to cover the situation in which the taxpayer disputed the amount claimed to be due before that money had been paid; that after payment had been made, that practice could not be applied in relation to IPT in the face of a clearly-worded contrary statutory provision; that a claim to restitution under section 59(1)(1) was only available to a person who had paid an amount to the commissioners by way of tax which was not in fact due, and did not extend to persons who have put the taxpayer in funds to make such a payment; that while EC law obliged the UK to provide an effective redress for the breach of EC law that was the introduction of the differential rates of IPT on travel insurance, the issues raised by such a claim for redress could only be determined in proceedings brought for that purpose; and that since the decision affecting the person given the right to demand a review must be a decision on one of the matters enumerated in section 59(1), section 59(2) was of no assistance to the respondents.