Marks & Spencer Plc v Commissioners of Customs & Excise

A person may rely directly on a Directive against the State only where the relevant provision is unconditional and sufficiently precise, and the Member State has failed to implement it correctly or at all. Correct transposition means that a later administrative misinterpretation ordinarily gives rise to a remedy in the national courts, rather than a directly enforceable right under the Directive.

General principles of Community law protect enforceable Community rights but do not normally create such rights where none otherwise exists. A national limitation period may be incompatible with the principle of effectiveness if it makes recovery virtually impossible or excessively difficult. Whether retrospective legislation removing an accrued right to recover overpaid VAT had that effect required a reference to the ECJ.

Marks & Spencer had accounted for VAT on teacakes which were properly zero-rated and on gift vouchers at their face value rather than the discounted amount paid. It claimed repayment under section 80 of the Value Added Tax Act 1994.

The VAT Tribunal upheld a three-year statutory cap on repayment claims and found that repayment of more than 10 per cent of the teacakes claim would unjustly enrich M&S. Moses J dismissed both appeals: [1999] STC 205. The central issues were whether M&S could rely directly on the Sixth Directive, whether the retrospective limitation imposed by section 47 of the Finance Act 1997 breached Community law, whether payment and repayment traders were unlawfully discriminated against, and whether the unjust-enrichment finding was legally sustainable.

1. Teacakes and later vouchers. The court held that both Becker conditions had to be satisfied before a claim could be founded directly on the VAT Directive. The teacakes and later vouchers claims failed the first condition because the Directive had been correctly transposed into domestic law. A taxpayer could challenge an administrative misconstruction in the national courts, but could not thereby convert the Directive into an independent source of rights.
2. The second Becker condition also failed for the teacakes claim. Article 12(1) did not define an unconditional and sufficiently precise right to a particular tax rate. Where a transaction was subject to an exemption with refund, it was not a taxable transaction for the purpose of that provision, and the applicable rate remained dependent on domestic legislation permitted by Article 28(2)(a).
3. General principles of Community law, including legal certainty and legitimate expectations, protected enforceable Community rights but did not generally create a right to recover tax where no such Community right otherwise existed.
4. Early vouchers. M&S did possess an enforceable Community right to repayment. Whether the retrospective three-year cap unlawfully made exercise of that right virtually impossible or excessively difficult was unclear. The issue was not acte clair and was referred to the ECJ. The court also rejected the discrimination argument because payment traders and repayment traders were governed by distinct legislative regimes and there was no evidence that comparable competitors had actually received different treatment.
5. Unjust enrichment. The Tribunal applied the correct approach. The burden lay on the Commissioners to establish unjust enrichment by comparing M&S's actual position with the position it would have occupied had VAT never been charged. Its conclusion that repayment beyond 10 per cent would unjustly enrich M&S was supported by the evidence and open to it.

The unjust-enrichment appeal was dismissed. The remaining appeal was allowed in part and the question concerning the retrospective limitation was referred to the ECJ.

1. Court of Appeal (Civil Division) — The appeals from the VAT Tribunal decisions were considered following dismissal by Moses J at [1999] STC 205. The Court of Appeal dismissed the unjust-enrichment appeal, allowed the remaining appeal in part, and referred a question concerning retrospective limitation of VAT repayment claims to the ECJ.
2. VAT Tribunal — The Tribunal upheld the capping defence and found that repayment of only 10 per cent of the teacakes overpayment would avoid unjust enrichment.