Kuwait Petroleum (GB) Ltd v Commissioners of Customs and Excise

Permission to appeal under section 55 of the Access to Justice Act 1999 should be granted where the proposed appeal has more than a fanciful prospect of success. A credible argument that the decision below may breach the fundamental principle of VAT neutrality is sufficient to satisfy that threshold, even though the applicant faces a difficult appeal. The court may also invite listing authorities to consider hearing related appeals together, without directing that course.

Kuwait Petroleum operated a customer loyalty scheme involving fuel purchases, vouchers and later redemption goods. The VAT Tribunal referred questions concerning the scheme to the Court of Justice of the European Communities, which gave judgment reported at [1999] STC 488. The Tribunal subsequently rejected Kuwait Petroleum’s arguments, and Laddie J dismissed its appeal in the Chancery Division on 20 December 2000.

On a renewed application, Kuwait Petroleum abandoned its consideration argument and relied on a price reduction argument under Article 11C of the Sixth Directive. The central question was whether that argument had a sufficient prospect of success to justify permission to appeal.

1. Application allowed. Permission to appeal was granted. The applicant was permitted to file a further skeleton argument.
2. The applicable threshold under section 55 of the Access to Justice Act 1999 was satisfied. The applicant’s task on a further appeal remained difficult, but the proposed appeal had more than a fanciful prospect of success.
3. The price reduction argument raised a substantial issue concerning the principle of VAT neutrality. That principle is a basic feature of the Community VAT system and seeks to ensure that taxation ultimately falls on the final consumer. The argument was that the provision of redemption goods could constitute a reduction, after supply, in the price of the fuel, alongside a notional supply of the redemption goods under Article 5(6) of the Sixth Directive.
4. The consideration argument, which depended on an implied bargain allocating part of the fuel price to vouchers and redemption goods, was no longer pursued and did not form part of the proposed grounds of appeal.
5. Lord Justice Robert Walker noted the discussion in Bugeja and the European authorities surveyed there. He considered that the argument against breaching VAT neutrality more than was unavoidable gave the proposed appeal a fair start. Mr Justice Lightman agreed.
6. The listing authorities were invited to consider whether this appeal could be listed with the appeal in Bugeja. No direction to that effect was made.

• Court of Appeal (Civil Division): The renewed application for permission to appeal was allowed.
• Chancery Division: Laddie J dismissed Kuwait Petroleum’s appeal from the VAT Tribunal’s decision on 20 December 2000.
• VAT Tribunal: The Tribunal rejected the arguments concerning the VAT treatment of the customer loyalty scheme after the European reference.