The Conde Nast Publications Ltd v Revenue & Customs

A limitation provision introduced without the transitional period required by Community law could not bar accrued claims for under-deducted input tax. The Court of Appeal was bound to follow its recent decision to that effect unless later Court of Justice authority justified departure.

Alternatively, a claimant need not prove that it would have claimed during a hypothetical transitional period. Where the revenue authority had represented that comparable claims could be made by 30 June 2003, refusing a claim made within that period would defeat the protection of legitimate expectations.

The appellant sought repayment of more than £115,000 in input tax under-deducted on staff entertainment expenditure. The disputed part concerned accounting periods ending before regulation 29(1A) of the Value Added Tax Regulations 1995 took effect on 1 May 1997.

The VAT and Duties Tribunal dismissed the claim because it was not satisfied that the appellant would have claimed during any transitional period. Warren J dismissed the ensuing appeal: [2004] EWHC 1116 (Ch). The Court of Appeal considered whether its intervening decision in Fleming required regulation 29(1A) to be disapplied and whether the principles of effectiveness and legitimate expectations independently protected the claim.

1. Appeal allowed unanimously. The majority decision in Fleming established that regulation 29(1A) of the Value Added Tax Regulations 1995 provided no legitimate basis for refusing an accrued claim for under-deducted input tax. The regulation contained no transitional period and therefore failed to protect directly effective Community rights. The court was bound to follow Fleming.

2. A later constitution of the Court of Appeal should not substitute its own interpretation of unchanged Community authority for that adopted by an earlier constitution. If there are strong grounds for doubting the earlier decision, the court may seek a preliminary ruling or follow the decision and grant permission to appeal. It should not depart merely because it would have reached another conclusion on the same material and arguments.

3. No reference was made under article 234 of the EC Treaty. The same principal issue was already pending before the House of Lords in Fleming. A reference would pre-empt or duplicate the House's consideration, while the subsidiary questions could not sensibly be referred without assuming answers to the principal issues.

4. Although unnecessary to the operative result, the tribunal had been wrong to require proof that the appellant would have claimed during a hypothetical transitional period. Such proof could be inherently difficult. Imposing that requirement would make the exercise of the Community right excessively difficult and would therefore contravene the principle of effectiveness.

5. On the alternative approach, the claim made on 27 June 2003 was protected by legitimate expectations, at least for input tax incurred before 4 December 1996. Until October 2003 the Commissioners treated under-deducted input-tax claims as claims under section 80 of the Value Added Tax Act 1994. Their Business Briefs stated that capped claims would be accepted until 30 June 2003. It was reasonable for a properly advised taxpayer to expect a claim made by that date to be met. The Commissioners could not defeat that expectation by relying on their later acceptance that such claims instead fell under regulation 29.

1. Court of Appeal (Civil Division): Allowed the appeal unanimously: [2006] EWCA Civ 976.

2. High Court, Chancery Division: Warren J dismissed the taxpayer's appeal from the tribunal: [2004] EWHC 1116 (Ch); [2005] STC 1327.

3. VAT and Duties Tribunal: Dismissed the taxpayer's appeal from the Commissioners' refusal of its repayment claim.