Westone Wholesale Ltd v Revenue & Customs

Commissioners may make and maintain alternative VAT assessments for the same accounting period where the assessments arise under different statutory powers or proceed on different factual or legal bases. The assessments are mutually exclusive, so they do not create an entitlement to recover the aggregate amount. A later assessment may therefore be issued without first withdrawing an earlier assessment, provided the statutory conditions and time limits are satisfied.

The existence of inconsistent assessments does not, by itself, breach legal certainty or proportionality where the taxpayer understands the alternative cases, knows the amount sought, and can challenge both assessments before the tribunal.

Westone appealed from a decision of the VAT and Duties Tribunal concerning two consolidated appeals against VAT assessments for the same accounting periods.

The earlier assessments concerned output tax on alleged supplies to a Spanish customer which had not been zero-rated. The later assessments concerned the recovery of input tax credits allegedly claimed on goods which had not been supplied to Westone. The Commissioners treated the later assessments as preferred and the earlier assessments as alternative, requiring payment of only one amount.

The preliminary issue was whether the Commissioners had power under section 73(2) of the Value Added Tax Act 1994 to issue and maintain the later assessments without first withdrawing the earlier assessments.

1. The appeal was dismissed. The making and notification of the later assessments was not ultra vires.

2. Sections 73(1) and 73(2) of the Value Added Tax Act 1994 confer separate powers. Section 73(1) addresses unpaid output tax, including under-declared or non-declared turnover. Section 73(2) addresses VAT repayments or credits which ought not to have been made. The two assessments therefore concerned different transactions and different fiscal consequences.

3. The decision of the Court of Session in University Court of the University of Glasgow v CCE [2003] STC 495 established that alternative assessments may be made even though the statutory language does not expressly mention them. Where assessments are expressly alternative, they are interrelated and mutually exclusive. Section 73(9) does not make the aggregate amount recoverable.

4. The fact that the assessments were made at different times did not prevent them from being alternative assessments. Courts plc v C & E Commissioners [2005] STC 27 confirmed that a subsequent assessment for the same period on a different legal basis may constitute an alternative assessment.

5. The earlier decision in Bennett v The Commissioners of Customs & Excise (No 2) [2001] STC 137 did not decide that an appeal suspends the obligation to pay. Its discussion of the appeal process concerned the Commissioners’ power to make a further assessment, not the suspensive effect of an appeal.

6. The principles of legal certainty and proportionality did not invalidate the assessments. The taxpayer understood the alternative cases, knew the sum it was required to pay, and could contest both assessments before the tribunal. Those principles remained relevant to the substantive appeal concerning entitlement to zero-rating, but not to the vires issue.

• High Court (Chancery Division): Appeal from the VAT and Duties Tribunal dismissed. The Tribunal’s conclusion that alternative assessments could be issued and maintained was upheld, although Mr Justice Patten gave partly different reasons.