John Wilkins (Motor Engineers) Ltd & Ors v HM Revenue & Customs

An appellate court should refer a critical EU-law question under Article 267 where it cannot resolve the issue with complete confidence. A reference is not required merely because the appellate court disagrees with the lower court, or because applying established EU principles to facts or national legislation is difficult. Where an existing reference to the CJEU is sufficiently broad to cover the proposed questions, a duplicate reference requires a material prospect of improving the resolution. Interpretation of national legislation and application of the Marleasing, effectiveness and equivalence principles are ordinarily for the national court, absent a special feature. An issue not argued or decided below cannot be referred in the current appeal and should be raised before the lower tribunal.

Motor traders claimed compound interest on VAT overpayments under section 78 of the Value Added Tax Act 1994. The Upper Tribunal Tax and Chancery Chamber held that the statutory provision allowed only simple interest: [2009] STC 2485.

On appeal, the appellants sought references to the CJEU concerning compound interest, the interpretation and application of the statutory scheme, and VAT charged before 1 January 1978. HMRC sought a stay pending the CJEU reference in Littlewoods Retail Ltd v HMRC. The central issues were whether the proposed questions should be referred and whether the appeals should meanwhile be stayed.

Disposition. Lord Justice Etherton gave the substantive judgment. The Master of the Rolls and Lord Justice Longmore agreed. HMRC’s application for a stay was granted, and the appellants’ applications for references to the CJEU were dismissed. The appeals were stayed pending the CJEU’s judgment in the related reference and for 56 days thereafter.

1. Reference discretion. Under Article 267, a national appellate court ordinarily refers a critical EU-law issue unless it can resolve it with complete confidence. The court applied the guidance in R v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd ex p Else (1982) Ltd [1993] QB 534 at page 545 and Customs and Excise Commissioners v Littlewoods Organisation plc [2001] EWCA Civ 1542, [2001] STC 1568. A reference is not required merely because the appellate court differs from the lower court, or because applying established EU principles to particular facts or national legislation is difficult.
2. Proposed Questions 1 and 3. Questions 1 to 3 in the Littlewoods reference were sufficiently broad to encompass the appellants’ arguments about entitlement to compound interest, its calculation and the period for which it might be payable. A further reference was unjustified because separate representation and separate claims did not create a material prospect of improving the resolution of the appeals.
3. Proposed Question 2. The appellants’ statutory claims differed from the common-law restitutionary claims in Littlewoods. The Marleasing principle and the EU-law principles of effectiveness and equivalence were established and well defined. Their application to the statutory scheme was principally a matter for the national court, which was better placed to interpret its own legislation. No special feature warranted a reference before those issues had been considered by the appellate court.
4. Proposed Question 4. The pre-1978 VAT issue had not been argued before or decided by the Upper Tribunal. It was a self-contained issue, separate from the Littlewoods questions, and was not before this court. Although there might be force in seeking a reference in the light of Chalke and Grattan, the proper course was to return to the Upper Tribunal.

• Court of Appeal (Civil Division) granted HMRC’s stay application and dismissed the appellants’ applications for CJEU references.
• Upper Tribunal Tax and Chancery Chamber held that section 78 of the Value Added Tax Act 1994 did not entitle the appellants to compound interest on VAT overpayments: [2009] STC 2485.