VAT — Recovery of input tax — Regulation 29(1A) of Value Added Tax Regulations 1995 — Whether time limit on recovery authorised by Article 18(3) of Sixth VAT Directive 77/388/EEC — Whether time limit constituting breach of right to peaceful enjoyment of possessions under Article 1 of First Protocol to European Convention on Human Rights — Appeal dismissed
The appellant was the trustee of a fund, the assets of which were commercial properties. The appellant had, as landlord, opted to charge VAT on the rents of some of the properties, which enabled it to recover VAT paid as input tax on the costs incurred in making the taxable supply of the land. Following a change in accounting procedure, the appellant discovered that it had failed to claim credit in its VAT returns for several items of input tax relating to accounting periods from 1998 to 2001. It submitted a claim to the respondent commissioners to recover the VAT. The commissioners allowed part of the claim, but refused it in respect of the 1998 accounting periods on the ground that the claim was time-barred under regulations 29(1) and (1A) of the Value Added Tax Regulations 1995, having been made more than three years and one month after the end of the accounting period in which the expenditure giving rise to the input tax had been incurred.
The VAT and Duties Tribunal dismissed the appellant’s appeal against that decision. The appellant made a further appeal, contending that the restrictions imposed by regulation 29 upon the right to recover input tax were not authorised by Article 18(3) of the Sixth VAT Directive 77/388/EEC. Article 18(3) provided for member states to determine the “conditions and procedures” by which a taxable person might make a deduction from VAT that it had not made in accordance with the provisions of paras (1) and (2) of that article. The appellant further sought to rely upon the right to peaceful enjoyment of its possessions under Article 1 of the First Protocol to the European Convention on Human Rights.
Held: The appeal was dismissed.
1. The expression “conditions and procedures” in Article 18(3) could include time limits. Regulation 29(1A) was authorised by Article 18(3): University of Sussex v Commissioners of Customs & Excise [2001] STC 1495 affirmed; Marks & Spencer plc v Commissioners of Customs & Excise (No 5) [2003] EWCA Civ 1448; [2004] 1 CMLR 8 applied; Marks & Spencer plc v Commissioners of Customs & Excise C62/00 [2002] STC 1036 considered; and General Motors Acceptance Corporation (UK) plc v Commissioners of Customs & Excise [2003] BVC 2358 distinguished. Given that regulation 29(1A) had, in principle, been authorised, it was not subject to challenge under European law, since the three-year time limit was not disproportionate, did not prevent the exercise of directly effective rights and did not breach the principle of equivalence.
2. It followed that the claim based upon Article 1 of the First Protocol also failed. Although a claim for repayment of VAT paid in error was a possession for the purpose of Article 1, the time limit was not unreasonable or disproportionate. Article 1 had not been infringed because the right to reimbursement had always been subject to the three-year limitation period, so that the application of that limitation period would not be an interference with that right. In any event, the limitation period had been imposed for the purpose of legal certainty, which was a legitimate aim, and was proportionate to that aim: Dangeville SA v France 36677/97 [2003] STC 771 and Stubbings v United Kingdom (1996) 23 EHRR 213 applied.
David Southern (instructed by Reynolds Porter Chamberlain) appeared for the appellant; Paul Lasok QC and Owain Thomas (instructed by the solicitor to Customs & Excise) appeared for the respondents.
Sally Dobson, barrister
