Midlands Co-Operative Society Ltd. v Revenue and Customs

A statutory right to repayment of overpaid VAT may be assigned unless the governing statutory code expressly prohibits assignment or such prohibition arises by necessary implication. The VAT transfer-of-going-concern provisions do not create an exhaustive code excluding other transfers. A transfer of engagements under section 51(1) of the Industrial and Provident Societies Act 1965 can therefore vest an accrued section 80 repayment claim in the transferee society. The right is not confined to the legal person who originally paid the VAT merely because section 80 refers to repayment to that person.

Midlands appealed against a decision of the VAT and Duties Tribunal dismissing its claim for repayment of output tax allegedly overpaid by Leicester, whose engagements had transferred to Midlands under section 51(1) of the Industrial and Provident Societies Act 1965.

The Tribunal held that only Leicester, as the society which had paid the VAT, could claim under section 80 of the Value Added Tax Act 1994. The central issue was whether the transfer of engagements had transferred Leicester’s accrued repayment claims to Midlands, notwithstanding that Leicester remained registered until 1997 and was subsequently cancelled.

1. Appeal allowed. The Tribunal’s decision was set aside and the matter was remitted to the Tribunal to determine the amount of overpaid tax and any available defences.
2. Section 80 of the Value Added Tax Act 1994 contains no express prohibition on assigning the benefit of an accrued repayment claim. Nor is such a prohibition necessarily implied by the statutory scheme. The reference to repayment to the person who paid the VAT identifies the original entitlement; it does not prevent the entitlement from subsequently vesting in another person.
3. Sections 49 and 49(1) to (3), supplemented by regulation 6 of the Value Added Tax Regulations 1995, regulate registration and continuity where a business is transferred as a going concern. They do not purport to regulate, or exclude, the assignment of an accrued section 80 repayment claim.
4. Regulations 9 and 30 concern the treatment of persons carrying on a business after death, bankruptcy or incapacity and persons acting in a representative capacity. They do not determine whether an accrued repayment claim may pass by assignment or operation of law. Regulation 37 merely prescribes how a section 80 claim is to be made.
5. The reasoning of the Court of Appeal in Co-Operative Group (CWS) Ltd v Stansell Ltd [2006] EWCA Civ 538; [2006] 1 WLR 1704 supported the conclusion that the wide statutory language of section 51(1) was capable of vesting the benefit of the claim in the transferee. The earlier contrary view in Shendish Manor Ltd (2004) VAT Decision 18474 could no longer be regarded as correct in law.
6. The court expressed no view on the alternative argument based on articles 5(8) and 6(5) of the EC Sixth Council Directive.

• High Court (Chancery Division): allowed the appeal against the VAT and Duties Tribunal’s preliminary decision and remitted the matter for determination of quantum and any defences.