Birmingham Hippodrome Theatre Trust Ltd v Revenue And Customs
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE LEWISON
- LORD JUSTICE VOS
Areas of Law
- Tax Law
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
The Court of Appeal dismissed the Birmingham Hippodrome Theatre Trust Ltd's appeal, ruling that HMRC was entitled to set off wrongly paid input tax against the Trust's claim for repayment of wrongly paid output tax. The court held that EU directives must be applied in full and that set-off is limited to payments from the same mistake. The case also referenced multiple EU law principles and prior cases.
Judgment
Lord Justice Lewison:
Birmingham Hippodrome Theatre Trust Ltd ("the Trust") is a registered charity which operates the Birmingham Hippodrome. Its principal supplies are supplies of theatre tickets. Under EU law those supplies ought to have been exempt from VAT with effect from 1 January 1990. That would have meant that it was not liable to pay output tax on those supplies; but, by the same token, that it was not entitled to deduct or reclaim input tax on supplies made to it. However, the UK failed to comply with EU law until 1996; and even then misinterpreted its scope. It was not until 2004 that the law was set on the correct footing.
The upshot is that the Trust is, in principle, entitled to apply for repayment of output tax that it paid HMRC in the period between 1990 and 1996. But between 2000 and 2001 when the theatre was closed for refurbishment, the Trust paid input tax but made no taxable supplies. In response to a claim made at the time by the Trust, HMRC paid the input tax to the Trust. The question that arises on this appeal is whether HMRC is entitled to set off those amounts of input tax that it (wrongly) paid to the Trust against the amount that the Trust now claims to be repaid in respect of output tax that it (wrongly) paid to HMRC. The main complication arises because HMRC is out of time for making its own free-standing claim to recover the input tax (wrongly) paid to the Trust.
Both the First Tier Tribunal (Judge Peter Kempster and Ms Helen Folorunso) and the Upper Tribunal (Proudman J and Judge Charles Hellier) held that HMRC was so entitled. The decision of the First Tier Tribunal is at [2011] UKFTT 117 (TC) , [2011] SFTD 473 . The decision of the Upper Tribunal is at [2013] UKUT 057 (TCC) ; [2013] STC 1079. With the permission of the Upper Tribunal the Trust appeals.
For the reasons that follow I would dismiss the appeal.
Legal background
The FTT set out the legislative background with admirable clarity, which the Upper Tribunal simply adopted without more. Anyone who is interested in the full story should read the decision of the FTT. But a short summary is necessary to understand the context in which the dispute arises.
At the relevant time VAT was governed principally by EC Council Directive 77/388 (the Sixth Directive). Article 13A (1) (n) of the Sixth Directive required member states to exempt from VAT "certain cultural services and goods closely linked thereto supplied by bodies governed by public law or