The Upper Tribunal (UT) has upheld the FTT’s decision to dismiss the taxpayer’s appeal in this case on the basis that the taxpayer had not established, on the balance of probabilities, that it had overpaid VAT.


The appeal concerned a claim made by Why Pay More for Cars Limited (WPMC) under section 80 of the Value Added Tax Act 1994, for repayment of VAT that WPMC contended was overpaid in various VAT periods between June 1973 and March 1997, on bonus payments received from car manufacturers.

The background to the claim was not disputed. Following Elida Gibbs, HMRC had accepted that the bonus payments should have been treated as a discount on the original price of the cars. However, HMRC refused WPMC’s claim because it considered that WPMC had not established, on the balance of probabilities, that it had overpaid VAT.

Before the FTT, WPMC relied upon three arguments in support of its contention that it had overpaid VAT:

  • it was the practice of HMRC to treat all bonus payments as consideration for a supply of services and require dealers to account for VAT on them irrespective of whether the bonus payments followed the line of supply of the car
  • it could be inferred from HMRC’s table, which set out the periods and manufacturers in respect of which evidence was available to show VAT had been paid (the “Elida table”), that WPMC accounted for the VAT in periods for which there was no entry (the “silent periods” issue) and
  • irrespective of the guidance contained in the Elida table, it could be inferred that WPMC accounted for VAT on the disputed bonus payment (the “VAT accounting” issue).

The FTT rejected all three arguments, and declined to draw any inferences in the absence of any direct evidence, and inconsistent approaches of manufacturers during the relevant period. The FTT held that WPMC had failed to show, on a balance of probabilities, that it had overpaid VAT.

WPMC appealed against the FTT’s decision in relation to arguments 2 and 3 to the UT. WPMC argued that the FTT’s analysis and conclusions (that were factual in nature) were flawed and the only true and reasonable conclusion, on the evidence before it, was to make the necessary inferences.

The UT’s decision

The UT considered that WPMC’s challenges to the FTT’s decision could only succeed on the basis set out in Edwards v Bairstow [1956] AC 14. In that case, Justice Viscount Simonds said that a finding of fact should be set aside if it appeared that the finding had been made “without any evidence or upon a view of the facts which could not reasonably be entertained”. If, on the application of this principle, an error of law is established, then the UT could exercise its power, under section 12 of the Tribunals, Courts and Enforcement Act 2007, to re-make the decision of the FTT.

The silent periods issue

WMPC argued that the FTT should not have taken the inconsistency of approaches between manufacturers into account. This lead to the FTT reaching the wrong conclusion.

The UT rejected this criticism. It held that it was clear from the FTT’s decision that it had considered the manufacturers individually as well as taking into account practices as a whole. In addition, the UT considered that the FTT was entitled to conclude that changes in practices by individual manufacturers made it unsafe to infer that VAT had been accounted for in a silent period from the fact it had been accounted for in another period. In the view of the UT, WPMC had not shown that the FTT’s evaluation was flawed in the Edwards v Bairstow sense.

The VAT accounting issue

WPMC relied on the well-known dicta of Justice Walton in Jonas v Bamford [1973] 51 TCI (at page 25), and the presumption of continuity to show that, in the absence of direct evidence in relation to an issue, the courts are willing to draw appropriate inferences.

WPMC’s submissions focussed on what was described as the Renault claim between 1989 and 1999. It relied on a letter from HMRC, dated 22 December 2010, which it submitted showed that HMRC had accepted that WPMC had accounted for VAT on the bonuses received from Renault between 1992 and 2000. It argued that, based on this evidence, the FTT had erred in misconstruing or failing to take account of the letter dated 22 December 2010.

The UT considered that the FTT was entitled to place little or no weight on the 2010 letter  and rejected WPMC’s Renault claim. The fact that HMRC accepted that WPMC had probably accounted for VAT on the bonuses it had received from Renault between 1992 and 1997, did not mean that WPMC had shown that it had accounted for VAT on bonuses received between 1989 and December 1991. The FTT was entitled to conclude that it was not satisfied that WPMC had shown that it had accounted for VAT on bonuses received during this earlier period. There were good reasons for the FTT’s doubts, namely, the absence of any documentary evidence in relation to any period other than between 1997 and 2000 and the length of time between that period and the one which was the subject of the appeal.

WPMC also sought to rely on other instances where HMRC had accepted that WPMC had accounted for VAT on bonuses in other periods eg Honda bonus payments received between 1981 and 1997. The UT accepted this was relevant, but did not agree that this meant the FTT had erred in reaching its conclusion. In the absence of evidence regarding the basis of the claims in dispute, the mere acceptance of a claim by HMRC in relation to a different period was not sufficient to establish that the disputed claim should also have been accepted.

WPMC’s appeal was therefore dismissed.


As is so often the case in tax appeals from decisions of the FTT, the longstanding Edwards v Bairstow principle looms large. The UT was clearly conscious of the constraints imposed on it by this principle in relation to findings of fact by the FTT.

A copy of the UT’s decision is available to read here.