Ford Motor Company Ltd v Revenue and Customs [2006] UKVAT V19424 (13 January 2006)
19424
PROCEDURE – application to strike out appeal – appeal against decision letter prior to supply – whether valid – yes – application dismissed

LONDON TRIBUNAL CENTRE

	FORD MOTOR COMPANY LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)

Sitting in public in London on 9 January 2006

Jonathan Peacock QC, counsel, for the Appellant

Sally Hutchings, Solicitor’s Office, HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This is an application by Customs to strike out a purported appeal by Ford Motor Company Limited on the ground that it is not possible for a decision letter to precede the supply to which it relates.  Mr Jonathan Peacock QC appeared for the Appellant and Mrs Sally Hutchings for the Respondent.
2.	Purely for the purpose of this application I find the following facts:
(1)	In early 2004 the Appellant determined to introduce a scheme designed to generate sales of Ford cars, the “Ford Bonus Scheme” which was designed to reduce the output tax payable on the sale of cars.  In May 2004 it sought a ruling from Customs as to the VAT liability of the scheme.
(2)	Mr Dave Whitehead, Tax Specialist, at Customs’ Large business Services, Automotive Sector—Basildon, replied on 12 August 2005 saying:
“I have reviewed all the information supplied once more and confirm that my earlier ruling regarding the taxable treatment of the Ford Bonus Promotion scheme is maintained, as per my letter to you dated 15 July 2005, together with the additional detail provided by Lesley Dearing in her letter of 12 July 2005.
I understand that you are keen to launch this scheme and, in order to facilitate the progress of this issue to the next stage, subject to your Consumer Credit legislation amendments, you will complete and account for one or more transactions using the proposed bonus scheme as soon as possible.
I must emphasise that the ruling contained in my previous letter relates exclusively to the facts as presented to date, based on the understanding that these transactions will take place shortly because the bonus programme has reached a stage where it can be piloted.  In the pilot, it will not be possible for the parties to extricate themselves from the agreements entered into.
You have the right of appeal against this decision to an independent VAT and Duties Tribunal, which must be made to the Tribunal within 30 days from the date of this letter.  I should advise you that if you do decide to appeal to a Tribunal, the Commissioners would apply to have the appeal struck out, if by the time the hearing is scheduled you have been unable to provide details of an actual supply under the proposed Ford Bonus Scheme.”
(3)	The Appellant purported to appeal that decision letter on 8 September 2005.
(4)	Customs were granted an extension of time in which to serve their Statement of Case until 24 October 2005.  On 18 October 2005 they applied for a further extension of time until 17 November 2005.  The Tribunal (Mr Wallace) directed that they serve their Statement of Case by 17 November 2005.  No such Statement of Case has been served.
(5)	On 8 December 2005 Customs applied for the appeal to be struck out on the ground that the decision letter of 12 August 2005 does not “constitute an appealable decision as it is concerned with a scheme which has not as yet been finalised or implemented.”
(6)	On 6 January 2006 a supply took place that was on the same basis as the draft documents previously submitted to Customs.
3.	The matter came before me at an applications hearing of Customs’ application to strike out the appeal for the reasons in paragraph 2(5) above.  Mr Peacock contends that, while there can be no appeal hearing until a supply has been made, there is nothing to prevent an appeal against a decision letter in relation to a prospective supply so long as the supply in question took place before the hearing.  He contends that the appeal should not be struck out and proposes a timetable for its preparation.
4.	Mrs Hutchings contends that Odhams Leisure Group Ltd v Customs and Excise Commissioners [1992] STC 332 is authority for the proposition that there can be no decision until there has been a supply, and accordingly there cannot be an appeal against a decision made before the supply to which it relates.  She regards this as a matter of principle for Customs.  I therefore directed, with their agreement, that the application be treated as one in public, and I agreed to give a written decision which, if it were against Customs, as I indicated it was likely to be subject to my studying Odhams Leisure, she well might wish to appeal.  She contends that, since there is no appeal, I have no jurisdiction to impose any timetable, although she agreed that Customs would not drag their feet in making another decision.
5.	This issue goes to my jurisdiction and I consider that impliedly I have jurisdiction to determine whether I have any jurisdiction (see, in relation to income tax, my decision in B W Jacques v Commissioners for HM Revenue and Customs (2005) SpC 513).  
6.	Section 83 of the VAT Act 1994 provides:
“Subject to section 84, an appeal shall lie to a tribunal with respect to any of the following matters— 
…
(b)   the VAT chargeable on the supply of any goods or services, on the acquisition of goods from another member State or, subject to section 84(9), on the importation of goods from a place outside the member States; 
(c)   the amount of any input tax which may be credited to a person;
…
(p)   an assessment— 
(i)   under section 73(1) or (2) in respect of a period for which the appellant has made a return under this Act; or 
(ii)   under subsections (7), (7A) or (7B) of that section; or 
(iii)   under section 75; 
or the amount of such an assessment…”.
7.	Section 84(3) provides:
“(3) Where the appeal is against a decision with respect to any of the matters mentioned in section 83(b), (n), (p), (q), (ra) or (zb) it shall not be entertained unless— 
 (a)   the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them; or 
 (b)   on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.”
8.	In Odhams Leisure the issue was whether children’s teaching packs were stand-rated or zero-rated.  The first appeal was against an assessment in relation to actual supplies.  The second appeal related to prospective supplies of a revised version of the prototype packs that were the subject of the first appeal, and was an appeal against Customs’ decision letter that the supply of the amended packs would be standard-rated.  It is clear that at no time before the Tribunal hearing had there been any supply in relation to the second appeal.  The Tribunal heard and decided both appeals without objection by Customs.  On appeal Customs raised the preliminary point that since there had been so supply the tribunal had had no jurisdiction and accordingly there was no appeal.  McCullough J agreed saying:
“The right to appeal to a value added tax tribunal is conferred by s 40(1) of the Value Added Tax Act 1983 (the 1983 Act). So far as material, the words are as follows: 
‘An appeal shall lie to a value added tax tribunal constituted in accordance with Schedule 8 to this Act against the decision of the Commissioners with respect to any of the following matters—… (b) the tax chargeable on the supply of any goods or services …’ 
   It is submitted by Mr Smouha that the language of s 40(1)(b) is wide enough to refer to a decision about the tax chargeable on a future supply. Section 40(3) is also material. This, so far as relevant, reads: 
‘Where the appeal is against a decision with respect to any of the matters mentioned in paragraph (b) … of subsection (1) above it shall not be entertained unless— 
(a) the amount which the commissioners have determined to be payable as tax has been paid or deposited with them; or 
(b) on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the value added tax tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.’ 
 Section 40(3) was amended by the Finance Act 1985. This amendment merely added the reference in sub-s (3) to other paragraphs of sub-s (1). The reference to para (b) of sub-s (1) had been in the 1983 Act from the beginning. Section 40(3), to my mind, suggests that Parliament contemplated that a supply, referred to in s 40(1)(b), would be one in relation to which the commissioners had already determined the amount of tax payable; in other words, that it would be a supply which had taken place.   
Such a view would accord, Miss Foster submits, with the general tenor of the 1983 Act. I agree. It would also accord with the general practice of the courts not to decide theoretical questions. Unless a clear statutory indication to the contrary existed, it is, in my view, to be presumed that the same would be so in relation to statutory tribunals.   
Value added tax has been charged in the United Kingdom since 1 April 1973. It was introduced by the Finance Act 1972, s 40(1)(c) of which was in terms identical to s 40(1)(b) of the 1983 Act.   
On 22 January 1973 the Cardiff Value Added Tax Tribunal had before it an appeal by Allied Windows (S Wales) Ltd v Customs and Excise Comrs [1973] VATTR 3. Allied Windows were anxious to know what tax would be chargeable if various goods and services were supplied by them. In October and November 1972 they had made three contracts to work for different individuals. The terms of the contracts were clear. They asked the commissioners to say whether or not tax would be payable on their performance. The commissioners gave an opinion adverse to Allied Windows. Allied Windows appealed. The tribunal, not without misgiving it would seem, considered the issues and decided in favour of the commissioners. Allied Windows sought to appeal to the Divisional Court, but on 13 April 1973 (Lord Widgery LCJ, Ashworth and Bridge JJ) struck out the appeal on the ground that no appeal lay to the value added tax tribunal on the facts of the case.   
The court has seen a short extract from the proceedings of 13 April 1973 and this is believed to be the fullest record of what was said on that date. The decision of the Divisional Court was followed on 12 July 1973 by the London Value Added Tax Tribunal in the case of Donald Cecil Morgan (trading as Parochial Church Council of Emmanuel Church, Northwood, Middlesex) v Customs and Excise Comrs [1973] VATTR 76. The Parochial Church Council held a Christmas market each year. They contended that the supply of goods by them at the market was zero-rated. The commissioners disagreed. The Parochial Church Council sought to appeal. The commissioners argued before the tribunal that no appeal lay because it did not relate to any particular supply which had been made. The tribunal upheld this objection following the Allied Windows decision of the Divisional Court. 
The chairman, Mr Swenson-Taylor QC (at 79), having referred to that decision, said this: 
‘Although no formal judgments were delivered and I have only been referred to an extract from the proceedings, it is clear in my judgment, that the Court took the view that a value added tax tribunal cannot, and I quote, “legislate on matters in advance”. In other words a tribunal cannot hear an appeal relating to a supply to be made in the future and no appeal lies to a tribunal under paragraph (c) of subsection 40(1) unless first, the supply has been made and secondly the tax thereon, if any, has become chargeable under section 7 of the Finance Act 1972 as from time to time amended. In the circumstances of the present case I have no hesitation in holding that the decision of the Divisional Court covers the present appeal if and so far as supplies are to be made in the future by the Church.’ 
   Mr Smouha has sought to distinguish the present case from Allied Windows, but I am satisfied that there is no distinction, either in law or in fact, at any rate none of any materiality.   
I hold that the value added tax tribunal had no jurisdiction to consider the second appeal. It follows that this court cannot entertain an appeal from its purported decision and that this court should therefore strike out the purported second appeal.”
9.	I have also read the Allied Windows and Morgan cases.  In the former the Tribunal report records at p 7: 
“On the 13th April 1973 an appeal by Allied Windows (S. Wales) Limited against the foregoing decision of the tribunal was struck out by a Divisional Court of the Queens Bench Division of the High Court of Justice in England on the ground that no appeal lay to a tribunal on the particular facts of the case.”
The Tribunal’s decision was given on 16 January 1973, whereas VAT came into force on 1 April 1973, and the Divisional court decided the case on 13 April 1973.  Clearly the Tribunal had jumped the gun and there cannot have been a supply before the tribunal hearing.  Morgan was a case of a hearing in July 1973 of a purported appeal against a decision letter of 8 May 1973 on whether the appellant was established primarily for the relief of poverty when at the time of the hearing no supplies had been made in relation to prospective supplies at a Christmas Market in 1973 for which the appellant had been preparing since January 1973.  In addition to the passage quoted in Odhams Leisure the President (The Hon Kenneth Suenson-Taylor QC) said at p 79: 
“However, as I have already mentioned, activities in connection with the Church's Christmas Market for 1973 commenced in January of this year, and various meetings sales and other matters in connection therewith may have already taken place. In such circumstances, especially having regard to the invitation of the Commissioners to the Appellant to appeal to a tribunal to determine the question whether or not the Church is established primarily for the relief of distress, I have decided that the proper course to adopt is to adjourn this application and give liberty to either party to require a further hearing of this application to be convened upon serving at the appropriate tribunal centre for this appeal a request for the hearing to be resumed. 
At such resumed hearing the Church can, if so advised, apply for leave to amend the Notice of Appeal in any way, and in particular by substituting therein a reference to another letter from the Commissioners as the letter containing the disputed decision for the present reference therein to the letter dated the 8th May 1973. It would thereby be possible for the Church to raise the issue whether or not it came within the Value Added Tax (Charities) Order 1973 in relation to a particular supply which will then have been made by the Church at, or in anticipation of, the Christmas Market for 1973. I have no doubt that the Commissioners will assist the Church in this matter by giving a decision upon such a supply.”
In the last paragraph he seems to have contemplated that Customs would make a further decision letter following a supply.
10.	None of these cases deals with the point before me where the order of events is (a) decision letter, (b) supply, and (c) appeal hearing.  I had always understood that the practice of the Tribunal was to accept jurisdiction in these circumstances (which, of course, does not mean that it is correct).  I recollect a case in which I was involved of UB (Biscuits) Ltd v Customs and Excise Commissioners (1986) Decision No.2040 in which the President (Lord Granchester, as he had then become) records “Supplies of a Chocolate Chip Bar and a Tropical Fruit Bar have been made before me for the purpose of these proceedings at 20p each…”  There may have been a supply following the decision letter in Procter & Gamble UK v Customs and Excise Commissioners (2003) VAT Decision No.18,381 in which the decision letter was dated 11 September 2002 and the Tribunal records at [11] “A specimen supply of the new product was manufactured and sold to an associated company of the Appellant which was not in the same value added tax group as the Appellant. An invoice for the supply was also raised. There has, therefore, been an actual supply.”  The decision does not state that the sale was after the decision letter but it seems that this is more likely.  I should say that neither party has researched this point in Tribunal decisions and there is no indication that the point was ever argued in these cases.
11.	There are two factors in the legislation that I consider are relevant.  First, that under s 84(3) the appeal cannot be entertained until the tax which Customs has determined is payable in its decision has been paid (or Customs or the Tribunal are satisfied that hardship would arise), which seems to imply that the decision letter will determine an amount of tax, and must therefore come after the supply to which it relates.  In C & E Comrs v Hubbard Foundation Scotland [1981] STC 593 the taxpayer was contending that entertain meant hear the substantive appeal, and Customs that it meant take any step in relation to the appeal.  In the Court of Session Lord Cameron concluded at p 600j:
“In this context and in these circumstances I am clearly of the opinion that entertainment of an appeal begins in the one case when the contested issue of competency is decided in the taxpayer’s favour, and, where no question of competency arises, from the date of service of the requisite notice of hearing in conformity with r 23.”
Lord Avonside said at p; 603d:
“…I have no difficulty in holding that a tribunal begins to entertain an appeal as soon as it fixes a date of the hearing thereof and sends out the appropriate notice to the parties. In any case, accordingly, in which there is a live appeal before the tribunal and either no r 20 application has been made by the appellant, or such an application has been made and has been refused or withdrawn, the question whether the tribunal is entitled to entertain the appeal arises at once and should be disposed of as soon as it has been drawn to the tribunal’s attention, by a r 6(2) notice or otherwise, that the tax has neither been paid nor deposited.”
Lord Emslie concurred with both.
In a normal case payment of tax or hardship is resolved as a first step to any appeal.  However, with a prospective supply the decision letter may not (as here) determine any particular amount of tax to be payable, and in any case a specimen supply made following a decision letter may involve a token amount of tax.  It is also the case that Customs can waive this requirement by failing to raise the issue before the tribunal begins to entertain the appeal, see Gittins v Customs and Excise Commissioners [1974] VATTR 109 and R v VAT Tribunal ex parte Minster Associates [1998] STC 386 at 390j.  Therefore even if Customs do not waive the requirement it is sufficient that tax is paid before the hearing date is fixed.  While at first sight the existence of this provision tends to support Mrs Hutchings’ contention, in the particular circumstances of this case I regard it as neutral because it can apply only if the decision letter does determine a particular amount of tax to be payable, which does not deal with the case that the decision letter does not do so.
12.	The second factor is to consider why Parliament provided for an appeal in s 83(b) (or (c) in relation to input tax) when in direct tax at the time these provisions were first enacted in 1972 there needed to be an assessment before one could appeal (a situation dealt with for VAT in s 83(p)).  One possibility is that Customs might be contending that a supply was exempt in which case there would be no output tax, but in such a case they could presumably normally make an assessment for a restriction in input tax.  In such a case a taxpayer might wish to appeal against the decision that the supply was exempt.  Another possibility is that with a self-assessed tax (which income tax was then not) working on a three-, or sometimes one-, monthly cycle it was expected that taxpayers might want to obtain a decision on the tax payable on a specimen supply in advance of making supplies generally.  Clearly a tribunal could not rule on a hypothetical supply, but if Customs were willing to give a decision I see no reason in principle why such a decision could not be appealed so long as by the time of the tribunal hearing there had been a supply.  Of course, it may be that Customs would not wish to give a decision on a supply that would depend on documents to be entered into, as opposed to the nature of a product, in which case the taxpayer would not be able to appeal.  But if (as here) Customs are willing to say what they consider the tax on a prospective supply to be it seems to me that the existence of s 83(b) supports the view that such a decision can be appealed.
13.	In this instance the Appellant has provided full details of the proposed scheme including draft documents.  The decision letter, obviously written by senior person, Mr Dave Whitehead, Tax Specialist in the Large Business Services, Automotive Sector–Basildon, clearly understood that no supply had yet taken place and envisaged that the Appellant would complete one or more transactions as soon as possible subject to making Consumer Credit legislation amendments (presumably meaning amendments to the scheme documents to comply with such legislation).  The letter went on to say that that the Appellant had a right of appeal against the decision and specifically advised that “the Commissioners would apply to have the appeal struck out if by the time the hearing is scheduled you have been unable to provide details of an actual supply under the proposed Ford Bonus Scheme,” which reads to me as if someone in Customs’ Solicitor’s Office had a hand in it.  I consider that there is nothing in Odhams Leisure that means that the writer was wrong, and there are also suggestions, to put it no higher, that the Tribunal has previously dealt with appeals on this basis.  There is nothing in s 84(3) that is contrary to this, particularly in a situation where Customs are co-operating with the taxpayer, as they clearly started to do in this case, in helping to obtain a decision from the Tribunal on the tax on a prospective supply.  I consider that the existence of s 83(b) is an indicator that Parliament expected that there could be appeals about prospective supplies, instead of having to wait for an assessment, which accords with the policy of the legislation for a self-assessed tax.  Accordingly, quite apart from the question whether Customs should now be allowed to resile from their letter (which is not a matter within my jurisdiction), I consider that the writer was quite correct in saying that an appealable decision was made in the letter, on condition that by the time of the hearing an actual supply had been made, as it now has been, and that there has therefore been a valid appeal by the Appellant.
14.	I therefore dismiss Customs’ application to strike out the appeal.  I direct that the timetable for the preparation of the appeal should be that proposed by Mr Peacock (with the omission of the possibility of Customs making an assessment), as follows:
(1)	By 21 April 2006 the Respondent serve their statement of case and a list of documents on which they wish to rely;
(2)	By 5 May 2006 the Appellant serve a list of documents on which it wishes to rely;
(3)	By 2 June 2006 both parties serve written statements of any witnesses upon which they propose to rely;
(4)	By 16 June 2006 the Appellant serve on the Respondent a draft index for an Agreed Bundle of Documents, and by 23 June 2006 the parties use their best endeavours to agree a Agreed Bundle of Documents;
(5)	That the appeal be listed for hearing (2 days) in the first available dates from 3 July 2006;
(6)	That 7 clear days before the hearing the parties shall serve on each other and on the Tribunal a skeleton argument;
(7)	That the parties shall agree a joint Bundle of Authorities to be served on the Tribunal 3 clear days before the hearing.
15.	I should like to end by expressing the hope that if Customs wish to challenge this decision they will not seek to suspend this timetable but will instead make another decision and agree the same or a similar timetable with the Appellant to cover the possibility that I have no jurisdiction to impose this timetable.  This preliminary issue may be a point that Customs want to resolve as affecting other cases, but it is also right that the Appellant should have its appeal decided without any further delay regardless of the outcome of that issue.  Even if Customs are right on the jurisdiction point they were sufficiently clear of their position to write a letter that the writer considered was a decision letter in an attempt to assist the Appellant and I hope that they will continue to assist it to obtain a decision by agreeing a similar timetable, particularly as they have until 21 April 2006 to take the first step.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE:13 January 2006
LON/2005/0936