The Upper Tribunal has dismissed an appeal against the refusal by HMRC to allow claims to revise the quantum of VAT repayable in respect of a margin claim on demonstrator cars (Cambria Automobiles (South East) Ltd v HMRC  UKUT 249 (TCC)).
Claims were made to HM Customs & Excise in June 2003 (“the 2003 claims”) in respect of the appellants (respectively “Cambria” and “Invicta”, and together “the Companies”) to recover historical overpaid VAT arising out of the CJEU Italian Republic case in respect of demonstrator vehicles. The 2003 claims were rejected and appeals against that rejection were notified to the VAT Tribunal.
Before the appeals were heard, and after various adjustments were made following lengthy negotiations, the 2003 claims were settled in March 2006 by agreement between the parties under section 85 VATA 1994, s. 85) (“the Section 85 Agreement”). Subsequently the quantum of the 2003 claims was considered to have been understated, because of errors in the tables originally published by HM Customs & Excise which showed the basis upon which they were prepared to accept Italian Republic claims. These tables had formed the basis of the 2003 claims.
New claims were then submitted by the Companies to HMRC in March 2009 (“the 2009 claims”), seeking to recover the shortfall in the original 2003 claims. HMRC ultimately rejected the 2009 claims. Appeals against this rejection were notified to the First-tier Tribunal in 2009 and 2010 but the appeals were stayed for other reasons. Ultimately the stays were lifted and the appeals were heard by the FTT.
In a decision dated 9 November 2021 (“the Decision”), the FTT (Judge Popplewell) decided (in summary) that the 2009 claims were precluded from being brought by virtue of the Section 85 Agreement, they amounted to an abuse of the process of the FTT and therefore ought to be struck out as having no reasonable prospects of success. Cambria and Invicta appealed against that decision.
Having considered the matter the UT concluded:
“For the above reasons, we consider it is clear that a reasonable person, having all the background knowledge which would have been available to the parties at the time of signature of the Section 85 Agreement, would have understood the phrase “the Appellants’ claim for overpaid VAT” in the Section 85 Agreement to have the meaning contended for by HMRC, namely as extending to all overpayments pursuant to the Italian Republic case in relation to the vehicles supplied by the Companies during the relevant periods.
Neither party disputed that if we reached this conclusion, then it would automatically follow that the appeals against HMRC’s refusal of the 2009 claims ought to be dismissed as an abuse of process. We agree.
It follows that we agree with the FTT that the Section 85 Agreement precludes the Companies from making any further valid Italian Republic claims in respect of the periods covered by it, that the attempt to do so in the 2009 claims was invalid and therefore their appeals against HMRC’s refusal of those claims amounts to an abuse of process.
We consider there to have been errors in the FTT’s Decision and therefore set it aside. In remaking the decision, we have reached the same conclusion as the FTT but for the different reasons which we have given. The appeal is therefore DISMISSED.”