Fleming (t/a Bodycraft) v Customs & Excise

Member States may impose reasonable time limits on claims to recover input tax, provided the rules comply with the principles of equivalence and effectiveness. Where a new limit applies retrospectively to accrued Community-law rights, transitional arrangements may be required so that the right remains effective. A failure to provide such arrangements does not invalidate the national rule. The proper consequence is that the taxing authority or court may be required to disapply it in an appropriate case. That protection is not indefinite. After an adequate period, legal certainty and finality may justify applying the limitation period. A claim made more than three years after the new limit took effect was therefore out of time.

The appellant appealed under section 11(1) of the Tribunals and Inquiries Act 1992 from the dismissal of his appeal by the Value Added Tax and Duties Tribunal. He sought repayment of input tax paid on three Aston Martin cars purchased in 1989 and 1990. His earlier claim concerning ten cars had been paid in 1994, but the later claim, made in October 2000, was refused under regulation 29(1A) of the Value Added Tax Regulations 1995.

The Tribunal held that the three-year limit could not be relied on because it had been introduced without adequate transitional arrangements, but dismissed the appeal on a separate discretionary ground. The issue before the High Court was whether the Tribunal’s first conclusion was correct.

1. Appeal dismissed. The Commissioners were justified in refusing repayment, and the associated judicial review proceedings were also dismissed.
2. Reasonable national limitation periods for recovery of tax are compatible with Community law where they comply with equivalence and effectiveness. Regulation 29(1A) was therefore not intrinsically invalid.
3. Where retrospective legislation leaves accrued rights subject to an already expired limitation period, the principle of effectiveness may require the authority or court to disapply the limit. The absence of transitional provisions can therefore prevent reliance on the limit in an appropriate case. This reflected the principles discussed in Marks & Spencer C-62/00 [2002] STC 1036 and University of Sussex v Customs and Excise Commissioners 2004 STC p1.
4. That protection does not continue indefinitely. Applying the reasoning in Grundig Italiana SpA v Ministero delle Finanze C-255/00 [2002] ECR I-8003, a claimant with an accrued right must proceed within a reasonable period after the new limit is introduced. Legal certainty may thereafter justify applying the limitation rule.
5. The appellant could have claimed repayment since 1990, but waited three years and five months after regulation 29(1A) came into force. The limitation period could therefore be applied to his claim.

1. High Court (Chancery Division) — appeal from the Value Added Tax and Duties Tribunal dismissed. The Tribunal’s decision had dismissed the appellant’s appeal against the Commissioners’ refusal to repay input tax.