Iveco Ltd (Iveco), a distributor of commercial vehicles, accounted for VAT on the full value of the original vehicle sale price but subsequent to this made bonus payments to customers in later tax periods. The taxpayer’s claim for VAT it had overpaid due to a subsequent reduction in the consideration paid for the vehicles was submitted in 2011 and refused by HMRC by reason of being out of time.
The key to this dispute is that the UK legislation did not contain any provisions providing for adjustments as a result of reductions in consideration until 1 January 1990. This is despite the fact that Member States were required to implement Article 11C(1) of the Sixth Directive (now Article 90 of the VAT Directive), which requires that the taxable amount must be reduced when the price is reduced after the taxable supply has taken place, into their domestic legislation. Whilst the taxpayer had a directly effective right to reduce its output tax liability, there was no UK legislation setting down how and when the adjustment should be made. The earlier First-Tier Tribunal (FTT) found for the taxpayer. It concluded that that in the absence of domestic legislation providing when the adjustment should be made, there were no VAT periods in which the taxpayer had failed to reduce its output tax. . As a result there had been no overpayments of output tax in any period, and therefore s80, and any time limits attaching to s80 claims, did not apply to these claims. The FTT moulded the current Regulation 38 to give the effect that the adjustment was made when the claim was submitted to HMRC and was not time barred. HMRC appealed.
The UT disagreed, concluding that s80 can be interpreted to give effect to directly effective rights for the periods before 1990. The result of this is that the VAT adjustments should have been made in the periods the bonuses were paid. With the then six year time limit coming in from 1 January 1990, the taxpayer had six years to make a claim. The UT noted that this time limit should be disapplied for the claims where the six year time limit had already expired by 1 January 1990 i.e. pre-1984. However, with the subsequent Fleming dispute going against HMRC, the taxpayer had an opportunity to claim for output tax overpaid pre-1984 during the Fleming window but that timeframe expired in March 2009. With that being the latest opportunity for Iveco’s claim, to be in time, the taxpayer’s claim in 2011 was considered to have been lodged out of time. The UT noted that it was more appropriate to mould s80 than the FTT’s approach of moulding Regulation 38. To access the decision click here.
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