Two car dealerships have lost an appeal at the Upper Tribunal over whether they can amend historic claims for VAT refunds for the sale of ex-demonstrator cars
The case centred around a margin claim for demonstrator cars which related to VAT on sales for the amount of £1.4m, which had been settled in 2006 by agreement with HMRC under section 85 Value Added Tax Act 1992 (VATA).
The latest Upper Tribunal appeal was brought by Cambria Automobiles (South East) Ltd and Invicta Motors Ltd ([2023] UKUT 00249 (TCC)) and related to a historic dispute over VAT refunds related to demonstrator cars ranging from Jaguars to Daimlers, and Fords to Austin Morris. Up to 70 demonstrators were sold every year.
In the latest case, Invicta was claiming £315,902.82 and Cambria £415,854.39. These figures had been calculated by the companies before interest had been considered.
Back in 2006, a settlement amount was agreed between HMRC and the car dealerships based on tables published by HMRC showing margins on the value of the cars that they would be prepared to accept in the absence of records.
The original claims dated back from 1976 to 1992 but HMRC, and previously the Inland Revenue, had accepted that the dealers would not have records of transactions.
As it happens, the tables showing the value of different types of cars were subsequently amended, allowing larger claims. The dealers made further claims to recover the difference in 2009, but these were rejected by the Upper Tribunal which ruled that settlement of the appellants’ claim for overpaid VAT in the section 85 agreement precluded further claims.
The tribunal rejected the new claims because they were ‘regarded as distinct claims as a result of Regulation 37 of the VAT Regulations. That regulation is in our view an administrative provision which simply requires that, to be validly made, a claim needs to include a statement of the amount claimed and the method of calculation so that HMRC are in a position to understand and respond to the claim properly.’
The judgment added that if the new figures were correct then this would lead to a completely new claim, thus ‘falling foul of statutory time limits’.
‘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.’
The judge dismissed the appeal but has left it open for further litigation due to a 56-day appeal window. ‘However this should not take effect immediately given that the appellants have appeal rights which they may well wish to exercise.’
HMRC and the FTT did agree on the fact ‘that the Section 85 agreement precludes the companies from making any further valid Italian Republic claims in respect of the periods covered by it’.
An HMRC spokesperson said: ‘'We are pleased the Upper Tribunal agreed the taxpayer could not re-open matters already been settled by agreement with HMRC. Settling appeals by agreement enables issues to be resolved sooner and with legal certainty.’