Customs And Excise v Laura Ashley Ltd

For the purposes of Value Added Tax Act 1994, section 73(2), the relevant prescribed accounting period is ordinarily the period to which the VAT repayment or credit relates. Where a voluntary disclosure corrects an earlier return, the assessment should relate to that earlier period, rather than the period in which the disclosure is made or the repayment is credited. The statutory time limits and practical consequences do not justify a construction inconsistent with the natural meaning of the provision and the structure of VAT administration. Customs and Excise Commissioners v Croydon Hotel and Leisure Co Ltd was confined to its materially different facts and did not require a different result.

The Commissioners appealed from a decision of the VAT and Duties Tribunal released on 19 December 2002. The dispute concerned repayments made to Laura Ashley after the then Court of Appeal decision in Primback Ltd v Customs and Excise Commissioners, which was later reversed following the ruling of the European Court of Justice.

The Commissioners subsequently assessed Laura Ashley under section 73(2) of the Value Added Tax Act 1994 for the accounting period in which its voluntary disclosure was received. Laura Ashley contended that the assessments should have been made for the earlier periods to which the VAT credits related. The Tribunal accepted that contention. The central issue was the correct prescribed accounting period for the purposes of section 73(2).

1. Appeal dismissed. The assessment under section 73(2) of the Value Added Tax Act 1994 was made for the wrong prescribed accounting period.
2. Section 73(2) permits the Commissioners to assess an amount as VAT due only for the prescribed accounting period in which an amount was paid or credited as a repayment, refund or VAT credit. In the circumstances of this case, that meant the periods to which the relevant VAT credits related, namely the periods ended October 1996 and October 1997. Those were the periods in which the original over-declaration of output tax had been made and to which the credits were attributable.
3. The interpretation was supported by the structure of VAT administration. Tax is accounted for by prescribed accounting periods, and errors in returns are generally related back to the period in which the error occurred. Sections 73(6) and 77(1), which prescribe time limits, formed part of the statutory context but did not justify departing from the natural construction of section 73(2).
4. The decision in Customs and Excise Commissioners v Croydon Hotel and Leisure Co Ltd did not require a different conclusion. That case concerned a credit claimed in a later return because it could not have been claimed in the earlier period. It did not establish that a repayment or credit arising from a voluntary disclosure correcting an earlier return was given for the period in which the disclosure was made.
5. The practical difficulties relied upon by the Commissioners were limited and did not outweigh the statutory language and VAT structure. The Tribunal’s decision was upheld.

• High Court (Chancery Division): The Commissioners appealed against the VAT and Duties Tribunal’s decision released on 19 December 2002. The appeal was dismissed.