Source EY
The First-tier Tribunal (FTT) has released its decision in this case concerning a claim for repayment of VAT in connection with the business of Brammer UK Limited (Brammer). The claim was made pursuant to s80 VATA94 and includes an amount of £233,302 (subsequently reduced to £183,677) said to be VAT overpaid in the period 1 June 1988 to 30 September 1996. The Claim was made pursuant to the extended time limits for such claims following the litigation in Fleming.
Brammer is part of a multinational group supplying machine parts and maintenance services to manufacturing industries. At all material times it operated a number of branches throughout the UK. The Claim arises from the way in which it is said that Brammer accounted for incentives or bonuses provided by manufacturers on purchases of fleet vehicles. The Claim relates to cars which were available for private use by employees such that the business was not able to recover input tax on purchasing those vehicles. Brammer contends that it incorrectly accounted for output tax on bonuses paid in respect of the cars as though they were consideration for a supply of services made by Brammer to the manufacturers.
Following Elida Gibbs there was the potential for motor traders, and others such as fleet purchasers, who had received bonuses and had incorrectly accounted for output tax on those bonuses to make claims for repayment of VAT going back many years. HMRC recognised that due to the passage of time it was unlikely that evidence to support such claims would still be held. HMRC worked with trade bodies, industry representatives, manufacturers, and dealerships and in relation to claims by motor dealers prepared what is known as the “Elida Table”.
The Elida Table was based on industry-wide averages relating to the level of manufacturers bonuses paid by certain manufacturers. It provided a template pursuant to which motor dealers who wished to make claims for overpaid VAT were able to lodge what HMRC would consider to be fair and reasonable claims. Claims could therefore be made without the detailed supporting documentary material which would otherwise be expected to establish such claims. Where a motor trader considered that it had a higher claim than the Elida Table would suggest, it was open to the trader to support it by reference to specific evidence justifying the higher claim.
The FTT noted that the burden was on Brammer to establish that it had overpaid VAT, and also the amount of VAT which it had overpaid. In refusing its claim, HMRC asserted that Brammer had not adduced sufficient evidence to establish, on the balance of probabilities either that it had overpaid VAT or the amount of VAT which it had overpaid.
Brammer’s case and its calculations of the amounts said to have been overpaid was not based on the number and actual cost of cars purchased in the Period. Instead, its starting point was the total value of vehicles purchased in the period (including commercial vehicles). Brammer used data from management accounts to identify additions to fixed assets (motor vehicles) in the period 1989 to 1994 and in 1996. The 1988 and 1995 figures were based on averages from that data. A ratio was then used re cars to vans purchased during a small sample period after the claim period which was then extrapolated over the whole claim period. HMRC challenged the approach taken as too broad and it assumed that vans and cars are similarly priced. It also assumed that none of the cars purchased were pool cars where input tax was recovered.
Dismissing the appeal, the FTT firstly concluded that it could not be satisfied that Brammer accounted for and overpaid VAT on manufacturer bonuses. Also, Brammer’s assumptions for calculating the amount of VAT overpaid gave rise to a significant margin for error. Whilst the calculations for the number of cars may well have been the best assessment that could be made on the material available, the FTT could not be certain that they resulted in a figure that is likely to be the amount of VAT overpaid by Brammer, or that is likely to be the minimum sum that has been overpaid.
Source Bailli
