The Supreme Court held that Taylor Clark Leisure Plc had not claimed repayment of overpaid VAT in time merely because Carlton Clubs Ltd, a former member of its VAT group, had written to HM Revenue and Customs. Under the United Kingdom rules, the representative member is the taxable person, and a repayment claim must be made by that member or by someone acting for it. Carlton wrote in its own interest, so Taylor Clark could not use those letters to meet the statutory time limit.
Taylor Clark Leisure Plc was the representative member of the Taylor Clark VAT group from 1973 until the group was disbanded on 28 February 2009. Around 1990 it transferred its bingo business, with effect from 1 April 1990, to Carlton Clubs Ltd, a company incorporated for that purpose and then a member of the group. Carlton was sold out of the wider group in 1998. It then accounted for VAT on its own registration.
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The case arose from historic VAT charged on bingo and gaming-machine income. Following challenges to those charges and to time limits for repayment, section 121 of the Finance Act 2008 allowed certain earlier claims to be made before 1 April 2009. The question here was who had actually made the claims before that deadline.
Carlton’s letters
On 16 November 2007, anticipating Fleming, Carlton sent four protective claims under section 80 of the Value Added Tax Act 1994. They concerned output tax for which Taylor Clark, as representative member, had accounted between 1973 and the first quarter of 1998: mechanised cash bingo takings, gaming-machine takings, participation fees, and added prize money and participation fees. Carlton used its own letterhead and the group registration number. Three letters were headed with Taylor Clark’s name and one with Carlton’s. Carlton did not tell Taylor Clark. On 8 January 2009 it revised one claim, giving both companies’ names and registration numbers, and asserted that the 1990 transfer letter had assigned to it the right to historic claims, including years before Carlton was incorporated.
HMRC’s handling of the claims led to rival repayment appeals. The central issue in the Supreme Court was whether anything Carlton had written could count as a timely claim by Taylor Clark.
The only issue on appeal
Taylor Clark and Carlton brought rival appeals. Carlton withdrew appeals after telling the First-tier Tribunal that HMRC had satisfied or repaid three claims. Its remaining appeal was sisted. It thus appeared that HMRC had paid Carlton the sums in three of the four appeals.
The First-tier Tribunal held that the right covering 1973 to 1990 had been assigned to Carlton, that the right for 1990 to 1996 had returned to Carlton when it left the group in 1998, and that Taylor Clark had neither made a section 80 claim nor had one made on its behalf. The second conclusion was contrary to both parties’ submissions. The Upper Tribunal agreed that section 80 required a claim by or for the taxpayer seeking repayment, so Taylor Clark was out of time. It reversed the assignment finding. It also recorded the parties’ agreement that Taylor Clark was the appropriate claimant for tax accounted for between 1990 and 1996, even after disbandment.
Taylor Clark appealed only the claimant issue: whether the VAT group, represented by Taylor Clark, could rely on timely claims made by another member. HMRC did not cross-appeal. The Extra Division of the Inner House allowed Taylor Clark’s appeal. It treated the representative member as embodying the group, a single taxable person or quasi-persona, and read an individual member’s claim as normally made for that representative member. On a purposive reading, Carlton’s letters were Taylor Clark’s claims.
The representative member is the taxable person
Lord Hodge, with whom Lord Mance, Lord Reed, Lord Carnwath and Lord Briggs agreed, began with article 11 of the Principal VAT Directive. A member state may treat legally independent persons who are closely linked financially, economically and organisationally as one taxable person, and may take measures against evasion or avoidance. The article permits such a regime but does not prescribe its form.
The United Kingdom used what is now section 43 of the 1994 Act. Business carried on by a group member is treated as carried on by the representative member. Supplies between members are disregarded, while supplies between a member and someone outside the group are treated as supplies by or to the representative member. Every member is jointly and severally liable for VAT due from the representative member. The group is not deemed to be a person. As the House of Lords explained in Thorn Materials Supply, the representative member is treated as carrying on the members’ businesses and is the single taxable person in VAT dealings with outsiders and HMRC. That is not an agency among the members. The representative member is the domestic embodiment of the single taxable person, not their agent or trustee. If the representative member changes, the same registration and bank account continue, and the rights and liabilities pass to the representative member for the time being.
Section 80 makes HMRC liable to credit the person who accounted for an amount as output tax which was not due, but only when a claim is made for that purpose. While a VAT group exists, and unless the claim has been assigned, the person who may claim is the current representative member or its agent. Lord Hodge agreed that only the representative member has an interest in the claim, but rejected the Inner House’s view that a member’s claim must normally be treated as made for the representative member. An assignee may claim in its own right, as Carlton purported to do, and someone may also make a claim to which it is not entitled.
Carlton claimed for itself
The First-tier Tribunal found from the letters that Carlton claimed in its own right and not for Taylor Clark. Lord Hodge held that this was not an error of law. Carlton had long ceased to be a member, which HMRC would have known. Even if it had remained a member, the letters would not have been claims for Taylor Clark without an assertion of agency, because the scheme envisaged that HMRC deal with the representative member. Carlton presented the new claims as extending claims it had already made about its own business after leaving the group. The group number identified where the tax had been accounted for, not who was entitled to repayment. The claims also reached back to 1973, before Carlton’s incorporation in 1990. The January 2009 letter revised one claim and explained that Carlton relied on the 1990 transfer and on Triad Timber for a right to be paid itself. That explanation was admissible evidence of the basis of the earlier letters. Both parties would readily have understood Carlton to be claiming in its own interest.
Agency and ratification also failed. The tribunal found, and those findings were not challenged, that Taylor Clark neither instructed nor authorised the claims, did not know that it had a potential claim, and that HMRC’s payment came out of the blue. The letters did not purport to be written as Taylor Clark’s agent. There was no finding that Taylor Clark ratified them, and its case below had not been that Carlton acted as its agent. Its counsel told the Upper Tribunal that Carlton had written on its own behalf. An onward appeal lay only on a point of law, so the appellate courts could not invent an agency.
No European reference
After seeing the draft judgment, Taylor Clark asked for a reference on whether this reading of section 43 is compatible with the single taxable person in article 11. Lord Hodge refused. A ruling was unnecessary to decide the appeal. Whether the representative member is itself the single taxable person, or represents a group quasi-person, Carlton had claimed for itself and not for the representative member or for a group which it had left. He also rejected the argument that Schedule 1 was inconsistent with section 43. That Schedule lets HMRC direct named persons to be treated as one taxable person, using a partnership as the domestic mechanism. It does not require a separate quasi-person.
Verdict: The Court unanimously allowed HMRC’s appeal. Carlton had claimed on its own behalf. Taylor Clark could not rely on those letters as a timely repayment claim made by or for the representative member.
Source: Commissioners for Her Majesty’s Revenue and Customs v Taylor Clark Leisure Plc [2018] UKSC 35
