Body Corporate – Bridge repairs – VAT refund scheme – Bridge built pursuant to 1792 Act requiring replacement – Claimant body responsible for replacement not being registered for VAT – Treasury refusing to specify claimant under VAT refund scheme – Claimant applying for judicial review – Whether Treasury erring in law – Application dismissed
The claimant was a body corporate established by the Whitchurch Bridge Act 1792, authorising it to build a bridge over the River Thames between Whitchurch and Pangbourne. The claimant was empowered to raise money by issuing shares. The 1792 Act made detailed provision for the building and maintenance of the bridge, gave power to override property rights and established mechanisms to resolve disputes. The bridge was vested in the claimant and its successors. Provision was made for tolls to be paid for using the bridge which remained subject to statutory control.
Onerous obligations were imposed upon the claimant to maintain the bridge in perpetuity. However, the arrangement underlying the 1792 Act was commercial in that dividends were paid to shareholders. Parliament had recognised the importance of convenient and safe river crossings and removed all the technical legal barriers preventing such projects and provided an incentive by way of tax relief. Section 42 of the 1792 Act provided that neither the bridge nor its tolls should be rated or assessed for or towards any public or parish rate, tax or duty. The present case was concerned with the modern application of that provision.
The current iron and steel bridge was in need of replacement. The secretary for state for transport provided for increased toll charges to enable the substantial works to be funded and implemented. The total cost of the proposed works was £3.3m excluding VAT and accumulated reserves were estimated at about £2.6m. If the claimant was unable to secure the repayment of the VAT which all the contractors and professionals had to charge, a potential further financial outlay of £660,000 might be expected. Since the claimant was not VAT registered, it could neither charge VAT on the tolls nor offset input tax. Therefore the claimant asked the defendant Treasury to specify it as a body eligible for a VAT refund under section 33(3)(k) of the Value Added Tax Act 1994.
The defendant identified two criteria consistently applied before admitting a body to the refund scheme under section 33(3)(k) as: (i) performance of a function usually carried out by local government; and (ii) power to levy local taxation or a local precept. The defendant refused the application on the basis that the claimant did not meet the second criterion. The claimant applied for judicial review.
Held: The application was dismissed.
The exemption conferred by section 42 of the 1792 Act provided that the bridge was to be extra-parochial and thus not liable to pay any rate, tax or duty which was parochial in nature. The exemption went wider because it extended to public rates, taxes or duties. The revenues of the claimant were exempt because the provision extended to the tolls. The immediate impact was to exempt the claimant from paying rates and land tax. But it would have extended to any other tax for which they might otherwise have been liable as owners of the bridge or the recipients of the tolls.
In the environment of taxation in which it was enacted, section 42 was not designed to relieve the claimant of the burden of taxation to the fullest extent possible by law. VAT was payable in the present day on the materials which would be used in the reconstruction of the bridge. In 1792 excise duty was payable on at least some of the materials used in its original construction. Parliament took no steps to ameliorate the economic burden of such taxes in 1792. The claimant’s submission that the intention of Parliament was to relieve them of the economic burden of all and every tax was too widely stated. Since the intention of Parliament was not as broad as the claimant contended, the introduction of a VAT repayment scheme for some non-registered public bodies by section 33 of the 1994 Act did not make any difference to the position. Unless it was the intention of Parliament in 1792 that the claimant should be relieved of the economic burden of taxes such as excise duty and customs duty, the 1994 Act could not assist. In 1792 there was no scheme to allow a rebate of taxes for which the claimant bore the economic burden but did not itself have to account. It was within the power of Parliament to grant to the claimant a periodic sum equivalent to the economic burden of all or any specified taxes. Since Parliament had chosen not to do so at the time, there could not be imputed to Parliament an intention that the claimant should benefit from such a scheme should it be introduced at a later date.
In R v HM Treasury and another, ex parte Service Authority for the National Crime Squad [2000] STC 638, Moses J held that that the criteria to be adopted, and how they should be applied, in determining whether to specify a body under section 33(3)(k) were matters of national financial policy with which the courts should be very slow to interfere. The two criteria applied by the defendant were unobjectionable and it was common ground that the claimant did not meet the second. Accordingly, the defendant was not obliged to admit the claimant to the refund scheme in section 33.
David Southern (instructed by Wilmot & Co, of Cirencester) appeared for the claimant; Raymond Hill (instructed by the Treasury Solicitor) appeared for the defendant.
Eileen O’Grady, barrister
