Investment Trust Companies v Revenue and Customs

A Woolwich restitutionary claim is confined to a claimant who was liable for, and paid, the relevant tax to the public authority under an apparent statutory obligation. An end user who paid VAT only contractually to a supplier cannot invoke that cause of action merely because it bore the economic burden of the tax.

Where EU law requires a statutory exclusion of common-law remedies to be disapplied, the claimant retains the ordinary domestic freedom to choose between concurrent remedies. The court need not identify and provide only the minimum remedy necessary to vindicate EU rights.

This further judgment concerned the final issue left unresolved in Investment Trust Companies v HMRC [2012] EWHC 458 (Ch). The claimant investment trusts sought recovery from HMRC of VAT paid to investment managers, representing tax which the managers could not recover because of the statutory limitation period in section 80(4) of the Value Added Tax Act 1984.

The court considered the effect of Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners [2012] UKSC 19 and Littlewood Retail Limited v Revenue and Customs Commissioners, Case C-591/10, on the availability of Woolwich and mistake-based remedies, following the disapplication of the exclusivity rule in section 80(7) of the Value Added Tax Act 1994.

1. The Woolwich cause of action was unavailable to the claimants. Properly understood, it is confined to persons who were themselves liable for the tax, and who paid it to a public authority in response to an apparent statutory requirement. The claimants’ obligation to pay VAT was contractual and ran only to the investment managers. Their bearing the economic burden of the tax did not alter the remedial analysis.

2. That conclusion was sufficient to determine the issue in favour of the claimants. The M & G Trust claim therefore succeeded in respect of the relevant “£25” element outside the dead period.

3. Alternatively, if the Woolwich remedy had been available to end users, section 80 of the Value Added Tax Act 1994 initially provided an exclusive statutory remedy for recovery of overpaid VAT. Once the exclusion in section 80(7) was overridden by EU law, however, the position was equivalent to one in which common-law causes of action had always been able to coexist with the statutory remedy.

4. In that situation there was no basis in English or EU law for confining a claimant to one common-law remedy or for selecting the remedy which objectively provided the best fit. The ordinary domestic freedom to choose between concurrent remedies applied. This approach was supported by the majority reasoning in FII [2012] UKSC 19, the treatment of section 33 of the Taxes Management Act 1970, and the guidance in Littlewoods, Case C-591/10.

5. The claim of M & G Trust succeeded to the extent of the “£25” element outside the dead period. The claims of Kleinwort Trust and F & C Trust, relating only to payments during the dead period, were dismissed.

The judgment was a further first-instance judgment following Investment Trust Companies v HMRC [2012] EWHC 458 (Ch). The final issue had been adjourned pending decisions in FII and Littlewoods.