Offshore Hydrocarbon Mapping POLC v Revenue and Customs [2006] UKVAT V19438 (01 February 2006)
19438

Refund of input tax – settled appeal – repayment supplement – interest rate and duration – VATA s.84(8).

EDINBURGH TRIBUNAL CENTRE

OFFSHORE HYDROCARBON MAPPING PLC	Appellant

- and -

THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE & CUSTOMS	       Respondents

Tribunal:	 (Chairman):  T Gordon Coutts, QC

Sitting in Edinburgh on Monday 30 January 2006

for the Appellant		HEARD ON PAPERS ONLY

for the Respondents	Mr Bernard Haley

© CROWN COPYRIGHT 2006.

DECISION

This appeal proceeded by way of written submissions by the Appellant and oral submissions for the Respondent.  Since there was no dispute on the facts that course was not inappropriate.

The Facts
The Respondent on 18 June 2004 disallowed an input tax reclaim by the Appellant in connection with two matters arising from an issue of shares.  Shares were issued within the EU and other shares were issued outwith the EU.  The Respondent had contended that this whole transaction was an exempt supply.  However they acknowledged that the shares issued outwith the EU was outwith the scope and after the Decision of the European Court in Kretztechnik conceded later that the whole supply was outwith the scope of VAT and that the Appellant was entitled to a refund of the input tax the Commissioners had claimed.  The sums at issue were in the first place £3,524 (the supply outwith the EU) and £10,740 being the sum which related to the supply within the Union.

The Respondent paid the lesser sum 42 days after 18 June 2004, the date of the disallowance of repayment, and the greater sum on 17 June 2005.

The Appellant sought payment of a supplement and also interest on the principal sums unpaid.  After some minor miscalculations the Respondent paid the appropriate supplement relevant to each sum.  They denied that interest was payable, unless ordered by a Tribunal.

The Respondent did not dispute the principle or reasoning in Bank Austria Trade Services Gesellschaft mbH 2000 EDN 16918, a decision which has been subsequently followed in UK Trade Corporation 2004 and Olympic Technology 2004 18714 and 19145.  It was not seriously disputed that there was interest due in the light of that decision on the greater sum for the period of 362 days.  But it was argued that the lesser sum was in a different category because the delay in payment was only 46 days and the 5% repayment supplement, it was said, was adequate compensation.

The Tribunal could not agree with that distinction.  For the reasons given in Bank Austria repayment supplement is only compensation in a limited sense; it is in truth a statutory penalty.  There is in addition compensation by way of interest which is due under VATA 1994 s.84(8)(b) VATA 1994.  Accordingly the Tribunal finds that the Appellant is entitled to interest for both those periods following their Bank Austria decision.

The rate of interest claimed was the reasonable rate (which was not challenged) of 3% to 5 September 2004 and 4% from 6 September 2004 on the sums outstanding.

Two matters require to be noted in connection with this appeal.  The first is that the Respondents regarded themselves as being unable to agree interest without a finding by the Tribunal in that regard it is considered that they adopt too narrow an approach to their powers.  If an appeal can be settled it seems to the Tribunal that all aspects of the appeal can equally be settled including supplements, interest and expenses.  It is not necessary to come to the Tribunal to rubber stamp an agreed rate or to have authority to pay.  Of course in the event of dispute then application to the Tribunal is essential.  The second matter to be noted is that no argument was presented in this case to the Tribunal on a rate of interest other than one following VATA 1994 s.78(3) as a template.  Accordingly any full compensatory aspect of interest in claims under Section 84 was not argued.  No reference was made to Sempra Metals v IRC 205 STC 687 perhaps because that case was seen to be relating to a different compensation regime.

The Appellant asked for its expenses and since it has been wholly successful is entitled to those expenses which failing agreement will require to be taxed by the Auditor of the Court of Session in terms of the Rules.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  1 FEBRUARY 2006

EDN/05/24