Claims for recovery of output VAT overpaid and for repayment of unclaimed input VAT - limitation periods for refund claims reduced with retrospective effect - directly enforceable Community law right to recovery not retrospectively curtailed

Marks & Spencer plc v Customs and Excise Commissioners; University of Sussex v Customs and Excise Commissioners: CA (Lords Justices Auld and Chadwick and Mr Justice Newman): 21 October 2003

In the first case, the taxpayer company sought, under section 80 of the Value Added Tax Act 1994, recovery of VAT wrongly paid on the face value of discounted gift vouchers, when it should have been charged on the discounted price, and at the standard rate on teacakes which should have been zero-rated.

The Customs and Excise Commissioners rejected the claim, relying on the three-year time limit retrospectively introduced by section 80(4) and, in respect of the tea cakes, the unjust enrichment provisions in section 80(3).

The VAT and duties tribunal upheld that decision.

Mr Justice Moses dismissed the company's appeal.

The Court of Appeal allowed the appeal in part and referred certain issues to the Court of Justice of the European Communities, which gave a ruling [2003] QB 866.

The Court of Appeal resumed the hearing.

In the second appeal the taxpayer university in November 1996 sought repayment of input tax which it had deliberately not claimed for many years.

There was no time limit for such claims under regulation 29 of the Value Added Tax Regulations 1995 until the introduction in May 1997, by the insertion of regulation 29(1A) in the1995 regulations, of a retrospective time limit for claims to deduct previously unclaimed input tax.

The commissioners, regarding the claim as a late claim for recovery of overpaid VAT under section 80 of the 1994 Act, rejected it in reliance on the three-year time limit in section 80(4).

The VAT and duties tribunal upheld that decision.

Mr Justice Neuberger [2001] STC 1495 allowed the taxpayer's appeal.

The commissioners appealed.

David Milne QC and Denis Waelbroeck (instructed by Forbes Hall) for the company; Paul Lasok QC and Peter Mantle (instructed by the Solicitor, Customs and Excise) for the commissioners; Roderick Cordara QC and Paul Key (instructed by KLegal) for the university.

Held, allowing the company's appeal in relation to the entire vouchers claim but otherwise dismissing the appeals, that by virtue of Council Directive 77/388/EEC a taxpayer had a directly enforceable Community law right to recover VAT wrongly paid and a corresponding entitlement not to have that right curtailed by the introduction of a retrospective time limit on claims without adequate transitional arrangements; but that where the provision in the directive was neither unconditional nor sufficiently precise, the taxpayer had no such directly enforceable right; that, since article 28.2(a) of the directive was insufficiently precise, a taxpayer could not rely on it to enforce domestic provisions concerning zero-rating for VAT purposes; that the university's claim was for deduction of input tax under regulation 29 of the 1995 regulations, rather than for recovery of overpaid VAT under section 80 of the 1994 Act; that questions arose as to the curtailment of a directly enforceable right to recovery of overpaid tax only under section 80, not under regulation 29; that the university's claim was unaffected by the time limit introduced after it had been made; and that, since the university was not in breach of any relevant administrative or procedural requirements, it was entitled to succeed on the entire claim.