Metropolitan International Schools Ltd v Revenue And Customs

Section 84(10) of the Value Added Tax Act 1994 has a limited scope. It applies only where a distinct prior decision was a necessary legal precursor to, and the appealed decision could not have been made without, that prior decision. A matter considered in reaching an assessment, including a legitimate expectation about transitional treatment, is merely a factor and does not satisfy the subsection. The provision does not give the First-tier Tribunal a general judicial-review jurisdiction. Claims that enforcement would be oppressive are ordinarily for judicial review.

The appellant supplied distance-learning courses. HMRC withdrew an agreed VAT apportionment and assessed the supplies at the standard rate. Correspondence then raised legitimate expectation and transitional-treatment issues.

The First-tier Tribunal found the supplies zero-rated but considered that it lacked jurisdiction under section 84(10) to determine the legitimate expectation issue. The Upper Tribunal reversed the VAT classification, holding the supplies standard-rated, and upheld the conclusion that section 84(10) did not apply. Its decision is reported at [2017] UKUT 431 (TCC). The central issue before the Court of Appeal was whether section 84(10) enabled the First-tier Tribunal to entertain the claim.

1. Disposition. The appeal was dismissed unanimously. The Court of Appeal upheld the Upper Tribunal’s conclusion that section 84(10) of the Value Added Tax Act 1994 did not apply.
2. Statutory threshold. Section 84(10) requires a distinct prior decision on which the appealed decision depended. The word depended means that the appealed decision could not have been taken but for the prior decision, both factually and as a matter of legal necessity. The prior decision must be a necessary legal precursor, rather than merely a factor considered in reaching the appealed decision.
3. Tribunal jurisdiction. The provision does not confer a general judicial-review jurisdiction on the First-tier Tribunal. Following the approach in Revenue and Customs Commissioners v Noor [2013] UKUT 71 (TCC), a legitimate expectation going beyond entitlement under the VAT legislation is ordinarily a matter for judicial review. The reasoning in Aspin v Estill [1987] STC 723 supported the distinction between legal liability and oppressive enforcement.
4. Application. HMRC’s view on a transitional or run-off period was no more than a factor in the decision to assess. The assessments could have been raised without HMRC first resolving the legitimate expectation issue. That issue did not determine whether VAT was chargeable or whether there was liability to assess. Section 84(10) was therefore inapplicable. The School’s legitimate expectation claim had to be pursued in its judicial-review proceedings.
5. Distinction from Corbitt. The position differed from Customs and Excise Commissioners v J H Corbitt (Numismatics) Ltd [1980] STC 231, where the relevant decision made the margin scheme unavailable and was a necessary legal precursor to the assessment.

• Court of Appeal (Civil Division) — Appeal dismissed. Newey LJ delivered the reasoned judgment, with David Richards LJ and McCombe LJ agreeing.
• Upper Tribunal (Tax and Chancery Chamber) — In [2017] UKUT 431 (TCC), the Upper Tribunal held that the supplies were standard-rated and that section 84(10) did not apply. It nevertheless observed that the School had a legitimate expectation against retrospective application, but not a three-year run-off period.
• First-tier Tribunal — The Tribunal found the supplies to be zero-rated supplies of books and considered that it lacked jurisdiction to determine the legitimate expectation issue.