Greater Manchester Police, R (on the application of) v Commissioners of Customs and Excise

Section 33(6) of the Value Added Tax Act 1994 applies blocking orders made under section 25(7) to the statutory refund scheme for public bodies. The relevant question is not whether the claimant could itself have claimed credit under section 25. It is whether the VAT falls within a category of input tax excluded from credit by the applicable order.

Accordingly, an order excluding VAT on motor cars supplied to taxable persons may apply, mutatis mutandis, to a refund claim by a public body, even where the cars are acquired solely for public functions and the body is not a taxable person in that capacity.

The Greater Manchester Police Authority sought judicial review of the Commissioners’ refusal to refund approximately £500,000 of VAT paid on motor cars acquired for public duties between January 1993 and January 1995.

Collins J dismissed the application, holding that section 33(6) incorporated the exclusion in paragraph 7 of the Value Added Tax (Input Tax) Order 1992. The Authority appealed. The central issue was whether section 33(6) applied only to the mixed-supply provisions in section 33(2), or also to refunds under section 33(1).

1. The appeal was dismissed with costs. Permission to appeal to the House of Lords was refused.

2. Section 33 provides a refund scheme for specified public bodies which are not taxable persons in respect of their public functions. Section 33(6) prevents the refund of VAT falling within a category excluded from credit by an order under section 25(7).

3. The statutory language cannot be resolved in isolation. The phrase “VAT chargeable” in section 33(6) is not confined to the identical wording in section 33(2), and the reference to VAT excluded from credit does not require that the particular claimant could itself have obtained a credit under section 25.

4. The 1992 Order was a deliberately broad anti-evasion measure. When applied to the refund scheme, paragraph 7 must be read mutatis mutandis. It identifies the category of VAT excluded from the refund scheme, notwithstanding that its direct wording concerns supplies to taxable persons.

5. Limiting section 33(6) to section 33(2) would deprive the blocking order of substantial practical effect. The statutory purpose was to permit exclusions from the refund scheme corresponding to exclusions from the ordinary credit mechanism.

6. The Sixth Directive was neutral on the construction issue. Aldous LJ, Robert Walker LJ and Hale LJ each reached the same conclusion, although Hale LJ expressed reluctance because of the policy underlying the refund scheme and the apparent breadth of the exclusion.

• Court of Appeal (Civil Division): The appeal from Collins J’s order of 22 May 2000 was dismissed with costs. Permission to appeal to the House of Lords was refused.
• High Court, Administrative Court: Collins J dismissed the Authority’s application for judicial review and upheld the Commissioners’ refusal of the refund.