In Iveco Ltd v HMRC  EWCA Civ 1982, the Court of Appeal has held that the time limit in section 80, VATA, applied to a taxpayer’s claim for repayment of VAT.
Iveco Ltd (Iveco) was the representative member of a VAT group selling commercial vehicles. Members of the group had made promotional payments (or rebates) between the beginning of 1978 and the end of 1989. Under Article 11C(1) of the Sixth VAT Directive (77/388/EC) (the VAT Directive), when the price of a supply is reduced, the taxable amount is reduced accordingly. However, UK legislation implementing the Directive only took effect on 1 January 1990. In 2011, Iveco sought a repayment of over £73 million to reflect rebates made between 1 January 1978 and 31 December 1989.
HMRC rejected Iveco’s claim on the basis it was time-barred. Iveco appealed.
The issue to be determined on appeal was whether the claim was time-barred.
The FTT found in favour of Iveco, taking the view that its claim was not subject to either a domestic time limit or any requirement under EU law for a claim to be brought within a reasonable period after a price reduction.
HMRC appealed to the Upper Tribunal (UT). The UT disagreed with the FTT and allowed HMRC’s appeal on the basis that Iveco’s claim was time-barred. Iveco appealed to the Court of Appeal.
Before the Court of Appeal, Iveco contended that it had a directly enforceable right to bring about a reduction in the taxable amount at a time of its choosing. There was therefore no question of any part of the claim being time-barred. HMRC argued that the “taxable amount” was reduced when a rebate was paid. It was open to Iveco to reflect that reduction in its VAT account at the time. As it had failed to do so, it was entitled to seek a repayment, but not a reduction of the taxable amount.
Court of Appeal’s judgment
The Court of Appeal dismissed Iveco’s appeal.
The Court held that there was nothing in Article 11C(1) of the VAT Directive to suggest that a member state could defer the time at which the taxable amount was reduced. It had therefore been incumbent on the UK to implement Article 11(C) by providing for a reduction in the “taxable amount” at, or soon after, the payment of a rebate.
Whilst the UK had failed to implement Article 11(C) until January 1990, taxpayers had been entitled to rely on this provision as it had direct effect. It was therefore open to a taxpayer to make an appropriate VAT adjustment when a rebate was paid. If a taxpayer failed to do so, its right was to claim that each relevant payment should have been reduced and it was entitled to seek a repayment.
The Court held that a taxpayer’s right to rely on Article 11(C)(1), did not permit it to reduce the “taxable amount” itself (and so trigger a repayment claim) years later. A taxpayer could not choose the time at which the reduction in the taxable amount occurred. In the circumstances, Iveco’s remedy, as regards pre-1990 rebates, was to claim to recover overpayments, which the Court held it could do under section 24, Finance Act 1989 and, later, section 80, VATA. However, the four-year time limit in section 80(4) ran from the date of payment of the rebate and on this basis Iveco’s claim was time-barred in its entirety.
As the Court had decided that as a consequence of section 80(4), the claim was time-barred, it concluded that it did not need to determine whether Iveco had a claim in restitution that was subject to a six-year limitation period.
As the Court noted, CJEU case law makes it clear that it is permissible to impose a time limit within which a person may bring proceedings relaying to the failure to implement a directive.
This judgment is largely of historic interest because it relates to supplies and price reductions that occurred before 1 January 1990 and, since that date, regulation 80 of the Value Added Tax Regulations 1995 sets out the procedure for reclaiming VAT on price reductions.
A copy of the judgment is available to view here.