Value added tax - recovery of sums paid to taxpayer - legal effect of judicial decision not 'facts' for purpose of time limit

Commissioners of Customs and Excise v DFS Furniture Co Ltd: CA (Lord Phillips of Worth Matravers, Master of the Rolls, Lords Justice May and Jonathan Parker): 16 March 2004

Between August 1996 and January 1997 the commissioners repaid to the taxpayer amounts of value added tax which the taxpayer claimed, but the commissioners disputed, had been overpaid.

In May 2001 the Court of Justice of the European Communities in Primback Ltd v Commissioners of Customs and Excise (Case C-34/99) [2001]

1 WLR 1693, confirmed the commissioners' understanding that the taxpayer had been liable for VAT for the amounts in question.

In September 2001, the commissioners issued recovery assessments under sections 80(4A) and 78A(1) of the Value Added Tax Act 1994, as inserted by sections 47 and 45(1) of the Finance Act 1997, on the ground that they had been under no liability to repay the taxpayer.

The taxpayer appealed to a VAT and duties tribunal on the ground that the assessments were unenforceable, since they were made outside the time limit prescribed by section 78A(2) of the 1994 Act, having been made more than two years after 'evidence of facts' justifying the assessments had come to the commissioners' knowledge.

The tribunal allowed the taxpayer's appeal, rejecting the commissioners' submission that the European Court decision was 'evidence of facts' for the purposes of section 78A(2) and that the two-year time limit therefore ran from the date of that decision.

Sir Andrew Morritt Vice-Chancellor allowed the commissioners' appeal and the taxpayer appealed.

Roderick Cordara QC and Mark V Smith (instructed by Landwell) for DFS; Paul Lasok QC and Peter Mantle (instructed by the Solicitor, Customs and Excise) for the commissioners.

Held, allowing the appeal, that the legal effect of a judicial decision was not 'evidence of facts' within the meaning of section 78A(2) of the 1994 Act; and that, since it was common ground that, judicial decisions apart, the commissioners at all material times knew all the relevant facts, the limitation period in section 78A(2) had long since expired and the assessments were accordingly made out of time.