Value added tax – Input tax credit – Legitimate expectation – Appellant commissioners refusing refund of input tax credit to respondent taxpayer on certain invoices relating to construction project – Refund found to be excluded on application of relevant VAT regulations – First-tier tribunal allowing appeal and granting refund on grounds of legitimate expectation – Whether FTT having jurisdiction to determine legitimate expectation issue – Appeal allowed
The respondent was involved in legal action and adjudication in relation to a dispute with a builder who he had engaged on the construction of a small commercial property. As a result, between August 2007 and February 2008 he received various invoices from solicitors and an invoice from the adjudicator. Meanwhile, in late 2007, in anticipation of receiving final invoices from the builder, the respondent telephoned the appellants’ national advice service to enquire whether he should register for VAT in order to be able to reclaim input tax arising from the construction of the property. He was advised that he should keep all invoices from the new build since he could claim a refund of VAT within three years under the option to tax.
The respondent accordingly registered for VAT with effect from July 2009. On his first VAT return, he claimed to deduct the input tax that he had paid on invoices relating to the construction project. The appellants allowed a refund of input tax on invoices for the construction works but refused it in relation to the invoices from the solicitors and adjudicator, on the ground that those invoices related to services that had been supplied to the respondent more than six months before his effective date of registration, so as to fall outside the applicable time limit under regulation 111(2)(d) of the Value Added Tax Regulations 1995.
The respondent appealed to the first-tier tribunal (FTT) under section 83 of the Value Added Tax Act 1994. He contended that the telephone conversation with the advice service had given rise to a legitimate expectation that he would obtain a refund of pre-registration input tax on the invoices from the solicitors and adjudicator, to which he had specifically referred in the course of that conservation. The FTT found that the respondent was not entitled to an input tax refund on a bare application of the legislation. However, it went on to hold that it had jurisdiction to consider the legitimate expectation issue and that such an expectation had arisen on the facts of the case, so as to entitle the respondent to a refund of input tax. The appellants appealed.
Held: The appeal was allowed.
Where the complaint of the respondent taxpayer was focused not on the consequences of the statute but on the conduct of the appellant commissioners, the appropriate remedy was by way of judicial review: Aspin v Estill (Inspector of Taxes) [1987] STC 723 applied. The FTT had no judicial review jurisdiction: Revenue and Customs Commissioners v Hok [2012] UKUT 363 (TCC); [2013] STC 225 applied. It had been created by section 3(1) of the Tribunals, Courts and Enforcement Act 2007 for the purpose of exercising the functions conferred on it by statute. As such, its jurisdiction was derived wholly from statute and it had no inherent jurisdiction equivalent to that of the High Court. The 2007 Act conferred no judicial review function on the FTT; that contrasted with the express provisions conferring such a function, with some restrictions, on the Upper Tribunal.
No power to determine a legitimate expectation argument arose on a statutory appeal under section 83(1). The jurisdiction on an appeal under section 83(1)(c) was not so wide as to allow the determination of any issue, including a public law issue, that went to the amount of the input tax that could be credited to a person. In that regard, the Upper Tribunal was entitled to depart from a previous decision of a High Court to the contrary: decision of Sales J in Oxfam v Revenue and Customs Commissioners [2009] EWHC 3078 (Ch); [2010] STC 686 not followed. Were it otherwise, there would effectively be an extensive power of judicial review in relation to the matters covered by section 83(1), with none of the procedural safeguards, such as time limits and the filter of a permission requirement, to which ordinary applications for judicial review in the Administrative Court were subject. It would be exceptional for an inferior tribunal to have a judicial review jurisdiction allowing it to adjudicate on public law issues other than in the course of its statutory jurisdiction. Had parliament intended to confer such powers, it would have made express provision for them.
Accordingly, the FTT did not have jurisdiction to give effect to any legitimate expectation that the respondent might be able to establish in relation to any credit for input tax. The right of appeal under section 83(1)(c) was concerned with a person’s right to credit for input tax arising under the terms of the VAT legislation. The subject matter of an appeal under section 83(1)(c) was the input tax that was ascertained applying the VAT legislation. Where a person claimed a right based on a legitimate expectation that went beyond his entitlement ascertained in accordance with the VAT legislation, that was a matter for remedy by judicial review in the Administration Court. The FTT had no jurisdiction to determine the disputed issue in the context of a section 83 appeal since its jurisdiction was appellate and it had no general supervisory jurisdiction over the decisions of the appellants. Although the FTT could, under section 83(1)(c), examine the exercise by the appellants of a discretion that arose under the VAT legislation itself, and could determine whether the discretion had been exercised reasonably, it could not deal with the case of an ultra vires contract or a claim based on legitimate expectation where the appellants were acting altogether outside their powers. Any remedy that a taxpayer might be awarded by the appropriate court or tribunal to give effect to a legitimate expectation was not itself input tax or a credit within the VAT legislation but was instead a financial adjustment to be reflected in the account between the taxpayer and the appellants.
Peter Mantle (instructed by the legal department of HMRC) appeared for the appellants; the respondent appeared in person for part of the hearing; for the remainder the respondent did not appear and was not represented.
Sally Dobson, barrister
Value added tax – Input tax credit – Legitimate expectation – Appellant commissioners refusing refund of input tax credit to respondent taxpayer on certain invoices relating to construction project – Refund found to be excluded on application of relevant VAT regulations – First-tier tribunal allowing appeal and granting refund on grounds of legitimate expectation – Whether FTT having jurisdiction to determine legitimate expectation issue – Appeal allowedThe respondent was involved in legal action and adjudication in relation to a dispute with a builder who he had engaged on the construction of a small commercial property. As a result, between August 2007 and February 2008 he received various invoices from solicitors and an invoice from the adjudicator. Meanwhile, in late 2007, in anticipation of receiving final invoices from the builder, the respondent telephoned the appellants’ national advice service to enquire whether he should register for VAT in order to be able to reclaim input tax arising from the construction of the property. He was advised that he should keep all invoices from the new build since he could claim a refund of VAT within three years under the option to tax.The respondent accordingly registered for VAT with effect from July 2009. On his first VAT return, he claimed to deduct the input tax that he had paid on invoices relating to the construction project. The appellants allowed a refund of input tax on invoices for the construction works but refused it in relation to the invoices from the solicitors and adjudicator, on the ground that those invoices related to services that had been supplied to the respondent more than six months before his effective date of registration, so as to fall outside the applicable time limit under regulation 111(2)(d) of the Value Added Tax Regulations 1995. The respondent appealed to the first-tier tribunal (FTT) under section 83 of the Value Added Tax Act 1994. He contended that the telephone conversation with the advice service had given rise to a legitimate expectation that he would obtain a refund of pre-registration input tax on the invoices from the solicitors and adjudicator, to which he had specifically referred in the course of that conservation. The FTT found that the respondent was not entitled to an input tax refund on a bare application of the legislation. However, it went on to hold that it had jurisdiction to consider the legitimate expectation issue and that such an expectation had arisen on the facts of the case, so as to entitle the respondent to a refund of input tax. The appellants appealed.Held: The appeal was allowed. Where the complaint of the respondent taxpayer was focused not on the consequences of the statute but on the conduct of the appellant commissioners, the appropriate remedy was by way of judicial review: Aspin v Estill (Inspector of Taxes) [1987] STC 723 applied. The FTT had no judicial review jurisdiction: Revenue and Customs Commissioners v Hok [2012] UKUT 363 (TCC); [2013] STC 225 applied. It had been created by section 3(1) of the Tribunals, Courts and Enforcement Act 2007 for the purpose of exercising the functions conferred on it by statute. As such, its jurisdiction was derived wholly from statute and it had no inherent jurisdiction equivalent to that of the High Court. The 2007 Act conferred no judicial review function on the FTT; that contrasted with the express provisions conferring such a function, with some restrictions, on the Upper Tribunal.No power to determine a legitimate expectation argument arose on a statutory appeal under section 83(1). The jurisdiction on an appeal under section 83(1)(c) was not so wide as to allow the determination of any issue, including a public law issue, that went to the amount of the input tax that could be credited to a person. In that regard, the Upper Tribunal was entitled to depart from a previous decision of a High Court to the contrary: decision of Sales J in Oxfam v Revenue and Customs Commissioners [2009] EWHC 3078 (Ch); [2010] STC 686 not followed. Were it otherwise, there would effectively be an extensive power of judicial review in relation to the matters covered by section 83(1), with none of the procedural safeguards, such as time limits and the filter of a permission requirement, to which ordinary applications for judicial review in the Administrative Court were subject. It would be exceptional for an inferior tribunal to have a judicial review jurisdiction allowing it to adjudicate on public law issues other than in the course of its statutory jurisdiction. Had parliament intended to confer such powers, it would have made express provision for them.Accordingly, the FTT did not have jurisdiction to give effect to any legitimate expectation that the respondent might be able to establish in relation to any credit for input tax. The right of appeal under section 83(1)(c) was concerned with a person’s right to credit for input tax arising under the terms of the VAT legislation. The subject matter of an appeal under section 83(1)(c) was the input tax that was ascertained applying the VAT legislation. Where a person claimed a right based on a legitimate expectation that went beyond his entitlement ascertained in accordance with the VAT legislation, that was a matter for remedy by judicial review in the Administration Court. The FTT had no jurisdiction to determine the disputed issue in the context of a section 83 appeal since its jurisdiction was appellate and it had no general supervisory jurisdiction over the decisions of the appellants. Although the FTT could, under section 83(1)(c), examine the exercise by the appellants of a discretion that arose under the VAT legislation itself, and could determine whether the discretion had been exercised reasonably, it could not deal with the case of an ultra vires contract or a claim based on legitimate expectation where the appellants were acting altogether outside their powers. Any remedy that a taxpayer might be awarded by the appropriate court or tribunal to give effect to a legitimate expectation was not itself input tax or a credit within the VAT legislation but was instead a financial adjustment to be reflected in the account between the taxpayer and the appellants.Peter Mantle (instructed by the legal department of HMRC) appeared for the appellants; the respondent appeared in person for part of the hearing; for the remainder the respondent did not appear and was not represented.Sally Dobson, barrister
