Courts Plc v Customs and Excise

Whether a VAT assessment has been made under section 73 of the Value Added Tax Act 1994 is determined objectively by what the Commissioners have done. A separate inquiry into the assessing officer’s subjective intention is unnecessary where those acts objectively constitute an assessment.

A protective assessment is valid. It creates a present liability when notified, even though enforcement is deferred pending the outcome of related litigation. Its protective purpose does not make it conditional or uncertain.

No universal administrative formula determines when every assessment is made. On the facts, signing off the VAT641 completed the assessment; computer processing and generation of a VAT655 were ministerial steps of notification. A later assessment for the same period does not automatically withdraw or supersede an earlier assessment.

Courts plc, a retailer offering interest-free credit, accounted for VAT in accordance with the Court of Appeal decision in Primback. While an appeal in that litigation remained unresolved, the Commissioners completed a VAT641 for eight VAT periods and sent Courts a letter stating that assessments had been made. They deliberately did not process the form or generate a VAT655.

After later assessments and, following the European Court of Justice ruling in Primback, a further processed VAT641, Courts challenged the December 1999 assessments. The VAT and Duties Tribunal rejected the challenge. Blackburne J dismissed Courts’ appeal: [2003] EWHC 2541.

The central issues were whether a valid assessment had been made in December 1999 and, if so, whether subsequent events withdrew or superseded it.

1. Appeal dismissed. The court unanimously upheld the validity of the December 1999 assessments.

2. Section 73 of the Value Added Tax Act 1994 distinguishes assessment from notification. The further distinction between a decision to assess and an assessment is not required by the statute. A merely executory decision has no statutory consequence. Conversely, where the Commissioners’ acts objectively amount to an assessment, there is no further question whether they intended the assessment which they objectively made.

3. The requirement that an assessment be made to the Commissioners’ best judgment may raise a question whether an officer approached the available material with an open mind. It does not change the objective character of the inquiry into whether an assessment exists. On the evidence, Mr Gurd exercised the relevant judgment in completing the VAT641.

4. A protective assessment is an assessment made to preserve the Commissioners’ position if related litigation is resolved in their favour. It gives rise, upon notification, to a present debt. A decision to postpone enforcement does not make the assessment conditional, void or uncertain. The December 1999 letter clearly notified present assessments, although recovery would await the outcome of the Primback litigation.

5. There is no statutorily prescribed procedure or universal formula for the making of an assessment. The Commissioners’ usual internal process is relevant but may be adapted for exceptional cases. Here, completion and sign-off of the VAT641 completed the assessment. Computer checks, ledger entry and generation of a VAT655 were ministerial functions and not part of the exercise of best judgment.

6. The May and June 2000 assessments were valid alternative assessments, payable whatever the outcome of Primback. The objectively made November and December 2001 assessment did not automatically cancel the earlier one. Its effect depended on the facts, and the Commissioners’ letter of 27 November 2001 made clear that the December 1999 assessments remained operative.

• Court of Appeal (Civil Division): dismissed Courts plc’s second appeal and upheld the validity of the December 1999 assessments.
• High Court (Chancery Division): Blackburne J dismissed Courts’ appeal from the VAT and Duties Tribunal: [2003] EWHC 2541.
• VAT and Duties Tribunal: held that a valid assessment had been made on 16 December 1999 and that later events did not invalidate it, subject to variation of figures by later alternative assessments: (2002) VAT Decision 17915.