REVENUE — Value added tax — Assessment — Repayment of overpaid output tax — Transfer of engagements between societies — Claimant seeking repayment of output tax overpaid by transferor — Whether benefit of claim for overpaid output tax assignable — Value Added Tax Act 1994, s 80

Midlands Co-operative Society Ltd v Revenue and Customs Commissioners [2007] EWHC 1432 (Ch)

Ch D: Blackburne J: 19 June 2007

The Value Added Tax Act 1994 and its associated Regulations allowed the benefit of a claim under s 80 of the Act for overpaid output tax to be assigned.

Blackburne J so held in the Chancery Division allowing an appeal by the claimant, Midlands Co-operative Society Ltd, from the decision of the VAT and Duties Tribunal dismissing its appeal from the Commissioners’ rejection of its claim for repayment of overpaid output tax under s 80 of the 1994 Act.

Leicestershire Co-operative Society Ltd (“Leicestershire”) passed a special resolution transferring all its engagements to the claimant pursuant to s 51 of the Industrial and Provident Societies Act 1965. The special resolution was registered and Leicestershire’s engagements transferred to the claimant. Leicestershire’s registration on the Registrar of Friendly Societies was subsequently cancelled as it had ceased to exist. Six years later the claimant sought repayment of VAT overpaid by Leicestershire prior to the transfer of its engagements. The claim was refused by the Commissioners on the basis that the claimant had no standing under s 80 to make the claim since it was Leicestershire that had overpaid. On the claimant’s appeal, the tribunal construed s 80(1) as confining the right to repayment under s 80 to the person who made the overpayment, namely Leicestershire, and held that there was no basis for treating the claimant and Leicestershire as if they were the same person.

BLACKBURNE J said that there was nothing in the 1994 Act or the Value Added Tax Regulations 1995 (SI 1995/2518) that expressly, or by necessary implication, prohibited a taxable person entitled to the benefit of an overpayment claim under s 80 from passing the benefit of that claim to another. With that in mind, and given that the transfer of engagements was effective to transfer to the claimant the benefit of Leicestershire’s claim under s 80, the tribunal had reached the wrong conclusion and the matter was remitted to the tribunal to determine the amount of the overpaid tax.

Appearances: Kevin Prosser QC (KPMG LLP) for the claimant; James Puzey (Solicitor, Revenue and Customs) for the Commissioners.

Reported by: Nicola Berridge, solicitor