The Supreme Court criticised the prolonged appeal over a VAT dispute involving the transfer of premises and fixtures to Stylo Barratt Shoes Limited, saying that the legal issue had become clear after a European court ruling.
In a judgment delivered on 31 March 2004, Chief Justice Keane said he agreed with the judgment and proposed order of Justice Fennelly. He added observations about what he described as the “somewhat mystifying course” of the proceedings. The supplied judgment page does not state the terms of the order proposed by Fennelly J, so the precise formal outcome cannot be established from this text alone.
The case began in 1996, when the company appealed an Inspector of Taxes decision refusing repayment of VAT claimed for the March and April 1994 VAT period. The inspector had also assessed £17,885.92 for that period. The inspector considered the transfer exempt from VAT under section 3(5)(b)(iii) of the Value Added Tax Act 1972 because it was connected with a transfer of a business or part of one.
The Appeal Commissioner ruled against the inspector, being satisfied there had been no agreement to transfer the business or any part of it. The purchase agreement set a price of £1 million sterling exclusive of VAT, and the company paid the vendors the amount considered due in VAT. Keane said the money should then have been passed by the vendors to the revenue, but the court was told it may not have been. He noted that the vendors appeared to have ceased trading shortly afterwards, while stressing that the factual position did not alter the legal point he was making.
Keane questioned why the appellant continued to pursue an argument that, if successful, would have produced a significant tax loss for the revenue. He also said no explanation had been given for the nearly six-year gap between the inspector’s dissatisfaction and the Appeal Commissioner signing and transmitting the Case Stated to the High Court.
The High Court ruled for the company in February 2003. Keane noted that the Court of Justice of the European Union had ruled in November 2003, in Zita Modes, that a transaction of this kind did not fall within the exemption. He said the appellant nevertheless asked the Supreme Court to return the matter to the Appeal Commissioner, potentially allowing further appeals. In Keane’s view, the issue had become “acte clair” after Zita Modes. He said he found it disquieting that no explanation for the sequence of events had been given to the court.