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John Wilkins (Motor Engineers) Ltd and others v HMRC [2010] EWCA Civ 923
These appeals are part of a growing area of litigation in which taxpayers who have over paid VAT claim entitlement to compound interest rather than simple interest. In each of these appeals, the appellant motor trader initially claimed interest under s 78 VATA 1994 and received simple interest. Claims for compound interest were later made between 10 months and two years after the initial claims for interest and were refused.
The group of dealers challenged the previous decision of the Upper Tribunal, which had ruled (1) that their claims for compound interest were made outside the relevant time-limits and (2) that s. 78 VATA 1994 could not be interpreted so as to require the payment of compound interest.
Today (Friday 30 July) the Court of Appeal decided that those dealers who had made their appeals to the VAT Tribunal (which on 1 April 2009 became the Tax Tribunal) had done so in time under rule 4 of the VAT Tribunal rules, which states that claims have to be made within 30 days of a disputed decision.
The Court of Appeal only dealt with the time-issue and a further hearing will be necessary to determine whether or not taxpayers are entitled to compound interest.
The Court of Appeal was split in its decision. Lord Justice Laws and Lord Justice Sullivan agreed with the appellant motor traders that s 78 VATA 1994 does not explicitly preclude the making of a second claim for interest within the 3 year (now 4 year) time limit permitted by s 78(11); accordingly, the disputed decision in each case was the Commissioners’ letter refusing to pay compound interest, and the appeals were brought within 30 days of that decision in each case. The majority considered that some repeated claims could be dismissed on the grounds of being abusive. Lord Justice Etherton agreed with the Commissioners that the second claims raised no new matters and that the disputed decision in each case was in substance the original decision to pay simple interest.
Peter Mantle and Philip Wolfe were instructed by the Commissioners for HMRC.
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Peter Mantle
Philip Woolfe