Iveco Ltd v The Commissioners for HMRC

A directly effective directive right to a reduction in the taxable amount does not allow a taxpayer to choose a later date, potentially decades after a rebate, to create a repayment claim. The reduction must be treated as arising at or soon after the rebate, as the United Kingdom should have implemented it. EU law permits national limitation rules for claims based on a failure to implement a directive, subject to equivalence and effectiveness.

Where VAT was overpaid on that footing, the statutory repayment route under the Finance Act 1989 and the Value Added Tax Act 1994 applied. The claim was therefore time-barred.

Iveco, the representative member of a VAT group, claimed repayment of £73,361,865 relating to rebates paid between 1978 and 1989. It had made no VAT adjustments for those rebates.

The First-tier Tribunal determined the limitation issue in Iveco’s favour. The Upper Tribunal, in its decision released on 13 June 2016 and corrected on 18 July 2016, held that the claim was time-barred. Iveco appealed to the Court of Appeal.

The appeal concerned when Article 11C(1) of the Sixth Directive reduced the taxable amount, whether relief should be obtained through Regulation 38 or Section 80, and whether earlier restitutionary claims had already become time-barred.

1. Disposition. The Court of Appeal unanimously dismissed the appeal. On the assumed facts, Iveco’s claim was time-barred in its entirety.
2. Direct effect and timing. Article 11C(1) of the Sixth Directive had direct effect. The authorities, including Van Duyn v Home Office [1975] Ch 358, Marshall v Southampton Health Authority [1986] QB 401 and Lombard Ignatlan Lízing Zrt v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatóság (Case C-404/16), established that suppliers could rely on the provision against the United Kingdom.
3. The United Kingdom’s discretion to prescribe conditions for reductions in the taxable amount was limited. VAT neutrality and the precise and unconditional nature of the obligation required the reduction at or soon after the rebate. A taxpayer could not defer the reduction and choose a date many years later. If no adjustment was made at the time, the taxable amount was treated as reduced when it should have been reduced, so that an overpayment arose. HMRC was not imposing an obligation on Iveco under the directive; Iveco was invoking the directive against HMRC.
4. Limitation and remedy. EU law permits national limitation periods for claims based on non-implementation, provided the rules satisfy equivalence and effectiveness. There is no general requirement to defer limitation until a right has been judicially established, and ignorance of legal rights does not disapply limitation. Iveco’s remedy for pre-1990 rebates was recovery of overpaid VAT under section 24 of the Finance Act 1989 and subsequently section 80 of the Value Added Tax Act 1994. It was unnecessary to mould Regulation 38 to provide a remedy.
5. The claim had to be brought within the applicable statutory framework and, at the latest, during the Fleming window, which had closed before Iveco’s claim was made in November 2011. The Restitution Issue was academic, so the court did not decide whether claims relating to pre-1984 rebates had survived until 1990.

• Court of Appeal (Civil Division): On 1 December 2017, Newey LJ gave the leading judgment and Henderson and Sharp LJJ agreed. The appeal was dismissed.
• Upper Tribunal (Tax and Chancery Chamber): The decision released on 13 June 2016 and corrected on 18 July 2016 reversed the First-tier Tribunal’s preliminary ruling and held that Iveco’s claim was time-barred.
• First-tier Tribunal: Decisions released on 6 December 2013 and 13 May 2014 determined the preliminary limitation issue in Iveco’s favour.