Revenue & Customs v The Boots Company Plc

On an appeal from a specialist tribunal, the High Court may intervene where the tribunal’s factual conclusion is unsupported by the evidence or is one which no reasonable tribunal properly directed could reach. An agreement under regulation 67 of the Value Added Tax Regulations 1995 must be binding and sufficiently certain, although it may be made informally. A taxpayer’s claim for repayment based on a mistaken interpretation of a statutory notice does not become a binding agreement to apply that treatment retrospectively merely because the Commissioners initially accept the claim and make repayment. The correspondence must be examined in its true context. Issues concerning the validity or retrospective operation of regulation 68 should not be decided on hypothetical facts where the alleged agreement is found not to exist.

Boots operated promotions under which customers buying qualifying goods received vouchers giving a credit against later purchases. Boots accounted for VAT on the full price of the qualifying goods and reduced the value of later redemption sales. It later claimed repayment on the basis of paragraph 7.18 of VAT Notice 727/4.

HMRC initially repaid approximately £3.35 million, then withdrew that decision and issued an assessment under section 80 of the Value Added Tax Act 1994. The VAT and Duties Tribunal held that the parties had reached a binding retrospective amendment to Boots’ bespoke retail scheme under regulation 67 of the Value Added Tax Regulations 1995. HMRC appealed, contending that the correspondence showed only a mistaken agreement about the proper legal effect of the notice.

Appeal allowed. The assessment dated 23 March 2005 was confirmed.

1. An appeal from the VAT and Duties Tribunal lies only on an error of law. Applying the principles in Edwards v Bairstow [1956] AC 14, intervention is justified where the tribunal has misconceived the evidence or reached a conclusion which no reasonable tribunal could reach on the facts found.
2. The word “agreed” in regulation 67 denotes a binding and sufficiently certain agreement. Such an agreement may be informal, but it requires finality of terms and an intention that both parties should become bound.
3. The correspondence showed that Boots was asserting an existing entitlement under paragraph 7.18 of VAT Notice 727/4. It did not seek a separate retrospective amendment to the bespoke retail scheme, nor did HMRC negotiate or agree such an amendment. The November letter accepted Boots’ mistaken interpretation of the notice and authorised repayment on that basis.
4. The Tribunal fundamentally misconstrued the correspondence by transforming a claim based on a mutual mistake of law into a negotiated agreement to apply a different accounting method. Its conclusion that a binding amendment existed was unsupported by the evidence and fell within the Edwards v Bairstow test.
5. It was unnecessary to decide whether an agreement of the kind alleged would have been ultra vires, capable of rescission for mistake of law, or retrospectively revocable under regulation 68. Those issues depended on an agreement which had not been made and were left unresolved.

1. High Court (Chancery Division): allowed HMRC’s appeal from the VAT and Duties Tribunal and confirmed the assessment dated 23 March 2005.
2. VAT and Duties Tribunal: allowed Boots’ appeal against the assessment, finding that the parties had agreed a binding retrospective amendment to the bespoke retail scheme.