Commissioners for Her Majesty’s Revenue and Customs v Taylor Clark Leisure Plc

Under the United Kingdom VAT-grouping regime, the representative member, rather than the group as a separate quasi-person, is the single taxable person. A claim under section 80 of the Value Added Tax Act 1994 for repayment of output tax overpaid during the life of the group must therefore be made by the current representative member, its agent or an assignee.

A claim made by another company for its own benefit does not become the representative member’s claim merely because it concerns group transactions or uses the group’s VAT registration number. Ratification is unavailable where the claimant neither purported nor was authorised to act as the representative member’s agent.

Taylor Clark Leisure Plc was the representative member of a VAT group between 1973 and February 2009. Carlton Clubs Ltd, a former group member, submitted protective claims for repayment of output tax which Taylor Clark had accounted for as representative member. Carlton acted without Taylor Clark’s knowledge and claimed repayment in its own interest.

The First-tier Tribunal and Upper Tribunal held that Taylor Clark could not rely on Carlton’s claims. The Inner House allowed Taylor Clark’s appeal in [2016] CSIH 54, treating the VAT group as a single quasi-person embodied by its representative member and construing Carlton’s claims as claims for that representative member.

The central issue was whether Carlton’s timely claims could be treated as claims made by or on behalf of Taylor Clark for the purposes of section 80 of the Value Added Tax Act 1994.

1. Appeal allowed unanimously. Lord Hodge, with whom Lord Mance, Lord Reed, Lord Carnwath and Lord Briggs agreed, held that Taylor Clark could not rely upon Carlton’s claims. The First-tier Tribunal had made no error of law in finding that Carlton claimed for its own benefit and not on Taylor Clark’s behalf.

2. Article 11 of the Principal VAT Directive permits, but does not prescribe a particular model for, national VAT-grouping arrangements. Section 43(1) of the Value Added Tax Act 1994 implements the option by treating the representative member as carrying on every group member’s business and as making or receiving external supplies. The representative member is therefore the single taxable person under United Kingdom law. The group itself is not a separate quasi-person.

3. Sections 80(1) and 80(2) make HMRC’s liability to credit or repay overpaid output tax conditional upon a claim for repayment to the person who accounted for that VAT. During the currency of a VAT group, that person is the current representative member. Unless the right has been assigned, the claim must be submitted by that member or by its agent. There is no presumption that a claim submitted by an individual group member was made for the representative member merely because otherwise it might fail.

4. Carlton’s use of the group VAT registration number identified the source of the payments but did not identify the person entitled to repayment. Its own letterhead, its earlier claims concerning post-group trading, its reliance upon an asserted assignment and its reliance upon the Triad decision all showed that it claimed in its own interest. Its later letter expressly revising one claim was admissible and relevant clarification of the basis of the related claims.

5. Agency and ratification could not assist Taylor Clark. Carlton had neither actual authority nor purported to act as Taylor Clark’s agent. A principal cannot ratify an act which the actor did not purport to undertake on the principal’s behalf. Moreover, the unchallenged factual findings and the case advanced before the Upper Tribunal left no basis upon which an appellate court could find an agency relationship.

6. A reference to the CJEU under article 267 of the Treaty on the Functioning of the European Union was unnecessary. Carlton had claimed in its own interest, so the outcome would be the same whether the representative member itself was the single taxable person or represented a group conceived as a quasi-person.

1. United Kingdom Supreme Court: Allowed HMRC’s appeal unanimously and restored the conclusion that Taylor Clark could not rely upon Carlton’s claims.

2. Inner House of the Court of Session: In [2016] CSIH 54, allowed Taylor Clark’s appeal. It held that the representative member embodied the VAT group as a quasi-person and construed Carlton’s claims as claims made for the representative member.

3. Upper Tribunal: Dismissed Taylor Clark’s appeal on the claimant issue. It held that section 80 of the Value Added Tax Act 1994 required a claim by or on behalf of the taxpayer seeking repayment and that Taylor Clark’s claim was time-barred.

4. First-tier Tribunal: Held that Carlton had claimed in its own right and not on Taylor Clark’s behalf. Taylor Clark could not rely upon those claims.