The Commissioners for HMRC v Colaingrove Limited

Section 80 of the Value Added Tax Act 1994 is the exclusive statutory route for reclaiming VAT already paid otherwise than pursuant to section 84(3). Section 84(8) does not confer a further interest jurisdiction in respect of a successful section 80 appeal. It applies only where payment or deposit was made to enable an appeal under section 84(3). Transitional provisions preserving section 84(8) apply by reference to the specific appealable decision, which must have been made and notified before 1 April 2009. Statutory interest may provide an adequate indemnity for EU-law purposes, and no conforming interpretation is required where the statutory scheme satisfies that requirement. The tribunal’s discretionary rate decision will not be disturbed absent an error of law.

The First-tier Tribunal allowed part of Colaingrove Limited’s claim for discretionary interest under section 84(8) of the Value Added Tax Act 1994. It held that section 84(8) could apply to VAT repaid after litigation of section 80 claims, but rejected claims concerning decisions made on or after 1 April 2009. The FTT awarded interest by reference to the margin between statutory interest and Bank of England base rate plus 1.5%.

HMRC appealed the section 80 issue. The Company appealed the post-April 2009 issue, its EU-law argument, and the interest rate. The central questions were whether section 84(8) applied to VAT reclaimed under section 80, whether transitional provisions preserved it for later decisions, and whether the FTT had erred in fixing the rate.

1. HMRC’s appeal allowed. The Company’s applications for further interest in relation to all the identified appeals were dismissed, and the FTT’s decision was set aside and remade.
2. Section 80 of the Value Added Tax Act 1994, read with section 80(7), was intended to provide the comprehensive and exclusive statutory basis for reclaiming VAT already paid. Allowing a taxpayer to proceed instead under section 83(b) would circumvent the unjust-enrichment defence in section 80(3).
3. Section 84(8) applies to repayment of an amount paid or deposited in pursuance of section 84(3). The repayment obligation does not extend to VAT paid in the ordinary course and later reclaimed under section 80. The majority reasoning in Cresta Holidays was confined to exceptional situations, such as resolving a point of principle before formulating a repayment claim or dealing with a change in law.
4. The Company’s alternative Ground 2 was unnecessary to the result. The Tribunal nevertheless considered that HMRC’s refusal to process the claims constituted a determination of VAT payable and that, had the issue arisen, the Company would have succeeded on that ground.
5. The transitional provisions in Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 preserve section 84(8) only where the specific appealable decision was made and notified before 1 April 2009. A general or underlying decision of principle could not replace the individual assessment or rejected claim under appeal.
6. The EU-law grounds also failed. The statutory interest regime could provide an adequate indemnity within the range identified in Littlewoods. There was therefore no basis for a conforming interpretation or for treating later decisions as protected by an accrued right under Emblaze.
7. The Company’s challenge to the rate failed. The FTT had considered the evidence and was entitled to use the parties’ settlement rate of base rate plus 1.5%. No error of law justified intervention.

• Upper Tribunal (Tax and Chancery Chamber): HMRC’s appeal allowed on Ground 1; the FTT decision set aside and remade. The Company’s appeal dismissed on all grounds. The Company’s applications for further interest were dismissed.
• First-tier Tribunal (Tax Chamber): decision released 29 May 2024. The Company’s section 84(8) claim was allowed in part, with interest awarded on some appeals and refused for post-1 April 2009 decisions.