DFS Furniture Company Plc v Customs & Excise

For a statutory VAT recovery assessment, “evidence of facts” does not include the legal effect of a statute or judicial decision. A judgment’s existence, wording and pronouncement are facts, but its legal effect is not. Where an excessive repayment results from an erroneous view of the law, the applicable limitation period is the period prescribed for assessments under Value Added Tax Act 1994 section 73(6)(a), running from the end of the prescribed accounting period in which the repayment was made. Section 78A(2) cannot be extended by treating a later judicial decision clarifying the law as evidence of facts.

DFS appealed against the Vice-Chancellor’s decision allowing the Commissioners’ appeal from the VAT and Duties Tribunal. The Tribunal had held that recovery assessments under sections 80(4A) and 78A(1) of the Value Added Tax Act 1994 were out of time. The Vice-Chancellor held that the existence, contents and effect of a later European Court of Justice judgment in the Primback litigation constituted facts or evidence of facts under section 78A(2), and allowed the assessments to proceed.

The central issue was whether the two-year limitation period began when the Commissioners learned of that judgment, or had already expired because the relevant facts, including the repayments, were known earlier.

1. Appeal allowed. The limitation issue was determined in favour of DFS. The assessments made in September and December 2001 were out of time.
2. On the natural meaning of section 78A(2) of the Value Added Tax Act 1994, “facts” do not include the legal effect of a statute or judicial decision. The enactment or pronouncement, its form and its words are facts, but its legal effect is non-factual. The words “evidence of” reinforce that conclusion.
3. The legislative context did not justify a wider construction. Sections 80(4A) and 80(4B) were intended to enable recovery of repayments made between 18 July and 4 December 1996 which were affected by the retrospective reduction of the repayment limitation period. Neither provision authorised treating a later judicial decision as evidence of facts.
4. The court applied the distinction explained by Lord Hobhouse in Evans: judicial decisions are sources of law, but are not statutes with absolute and incontrovertible status. A later decision clarifying the law therefore cannot be treated as a factual trigger for section 78A(2).
5. Section 73(6)(a) supplies the applicable limitation period where the alleged excess repayment arose from a mistake of law. The prescribed accounting period is the period current when the repayment was made. By parity with Croydon, the two-year period runs from the expiry of that period.
6. The court also disagreed with the Vice-Chancellor’s suggestion that “provision” in section 80(4B)(a) could include a subsequent judicial decision concerning the interpretation of legislation, a directive or a regulation. That word could not bear so wide a meaning. The Commissioners’ assessments were consequently barred by limitation.
7. The Commissioners were ordered to pay DFS’s costs in this court and below, subject to detailed assessment if not agreed. Permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division) allowed DFS’s appeal, reversed the Vice-Chancellor’s decision, and determined the limitation issue in DFS’s favour.
2. High Court, Chancery Division (Vice-Chancellor) ([2003] STC Ch D 739) allowed the Commissioners’ appeal from the VAT and Duties Tribunal, holding that a later judgment could constitute facts or evidence of facts for section 78A(2).
3. Value Added Tax and Duties Tribunal allowed DFS’s appeals against the assessments and held that they were out of time.